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U.S. President Donald Trump and his Chinese counterpart Xi Jinping have agreed to temporarily suspend escalations in their trade war for 90 days, signaling relief for many in the international community.

But conflict between the two powers may resume depending on the results of trade negotiations over the next three months. Here’s Dr. Shim Soon-hyung(심순형) at the LG Economic Research Institute to examine the upcoming trade truce between the U.S. and China.

During their meeting in Buenos Aires on the sidelines of the G20 Summit on December 1, Trump and Xi agreed to halt the imposition of additional tariffs on each other’s goods for 90 days.

Earlier, the American president said that tariffs on Chinese goods worth 200 billion US dollars would be raised from the current 10 percent to 25 percent, starting January 1, 2019. In response, China, which has already imposed tariffs on 110 billion dollars of American imports, was planning to retaliate with their own additional tariffs.

During their recent summit in Argentina, however, the U.S. agreed to hold off on additional tariffs on Chinese shipments for 90 days, while China acceded to greater imports of vehicles and agricultural products from the U.S. The new consensus means a temporary reprieve from their escalating trade war.

In July and August, the Trump administration imposed 25 percent tariffs on 50 billion dollars worth of Chinese products. Then in September, it placed 10 percent tariffs on an additional 200 billion dollars’ worth of Chinese goods. China responded with retaliatory tariffs of five to 25 percent on 110 billion dollars of U.S. imports, igniting the current trade war between Washington and Beijing. Trade relations were to only disintegrate further, as the U.S. planned to raise its 10 percent tariff to 25 percent from January next year.

China’s economic growth slowed to 6.5 percent in the third quarter of this year, down 0.3 percentage points from the same period last year. Meanwhile, sluggish auto and home sales in the U.S. threaten to slow down its economy. These and other factors likely drove the two countries to the negotiating table.

The 90-day ceasefire of sorts is expected to have a positive impact on the Korean economy.

For the Korean economy, the U.S.-China trade conflict is considered a major external risk factor. The 90-day reprieve is therefore expected to reduce risk indicators for Korea. I’d say that Seoul has been given some breathing room to diversify its export destinations.

But others remain wary, pointing out a drop in major stock indexes in New York on December 4 borne out of concerns over U.S.-China trade relations in the future. It is hard to tell whether this is truly the end of the trade war. Regardless, Korean companies should monitor the situation closely and seek appropriate measures to overcome their difficulties.

The pause in the U.S.-China trade dispute is good news for Korea’s export-driven economy – particularly the semiconductor, electronics and automobile industries. China buys more than 40 percent of all Korean semiconductor exports, and the Korean electronics sector relies heavily on China for outbound shipments of intermediary goods. The Korean automobile industry has also seen diminished profits due partly to the slowing Chinese economy.

A potentially reconciliatory mood in trade relations between Beijing and Washington was celebrated by the Korean stock market on December 3, with the benchmark Korea Composite Stock Price Index rising 1.67 percent from the previous trading day.

However, some analysts say that it is too early to be optimistic about the results of the trade negotiations between the U.S. and China.

It’s no exaggeration to say that Robert Lighthizer assumes the most important role in carrying out Washington’s trade policy concerning China. He has given concrete shape to Washington’s inexplicit complaints about China and crafted strategies to actually apply pressure on the Chinese government. It was none other than Lighthizer who brought up tough issues like forced technology transfers and intellectual property theft.

To meet Lighthizer on trade policy, China chose Vice Premier Liu He, who shares a decades-long close friendship with Chinese President Xi Jinpin. He is also well-versed in economy.

To put it simply, both the U.S. and China will send their most influential trade officials to the highly important negotiations. They will negotiate very sensitive issues and the results will have tremendous ripple effects. Thus, the two countries will not budge an inch as far as their own perceived national interests are concerned, even while discussing the issues in a calm and measured way. The negotiations are going to be tough for both sides.

Under the ceasefire agreement, the U.S. and China will hold negotiations to resolve issues of concern such as forced transfers of technology, the protection of intellectual property, non-tariff barriers and cyber theft.

Trump has named U.S. Trade Representative Robert Lighthizer, one of his cabinet’s trade hawks, to lead the negotiations with China. The appointment is interpreted as Washington’s determination to make no concessions on those difficult issues. China, meanwhile, is expected to defend its own interests through Vice Premier Liu He, a prominent economic expert trusted by Xi.

Considering what’s at stake, 90 days may not be sufficient time to hammer out key differences between Washington and Beijing.

The trade negotiations will end on March 1, but conflict may arise even before that. Most experts agree that China will not change its attitude. It is possible that the Chinese government will dismiss Washington’s demands to relinquish state involvement in particular industries or improve discriminatory practices against foreign firms. The “Made in China 2025” program, in particular, will be a particularly challenging point of negotiation, as China is heavily invested in the initiative.

Moreover, 90 days is too short to address complicated issues such as intellectual property, technology transfers and cyber security. It is difficult to reach a final decision on those issues in a short period of time since they could bring about a change in China’s basic economic structure.

Also, little progress in the negotiations may prompt trade hawks in the U.S., including White House trade advisor Peter Navarro, to ensure conflict continues.

The trade dispute between the U.S. and China is not just about remedying a bilateral trade imbalance. It is also a battle for technological dominance as well.

The U.S. is highly wary of the “Made in China 2025” strategy, Beijing’s ambitious plan to become a technology powerhouse by the year 2025 through domestic production of core technologies and component materials. The Trump administration included a large number of high technology products in its 25 percent tariff targeting 50 billion dollars worth of Chinese goods.

But China is unlikely to back down, tying the Made in China 2025 initiative to its national future and security. Conflict may reemerge if the two countries fail to reach a compromise during the negotiation period.

These concerns rose further when Meng Wanzhou, the chief financial officer of China’s global telecommunications giant Huawei and also the daughter of the company’s founder, was arrested in Canada on December 1 at the request of Washington.

Dr. Shim talks about how Korea should navigate the waters ahead.

China continues to make efforts to boost the domestic market, regardless of the results of its trade negotiations with the U.S. Currently, most of South Korea’s exports to China consist of intermediary goods, which can be influenced by U.S. tariffs on Chinese products. Now, it’s time to increase Korea’s shipments of consumer goods to China and explore the local market more aggressively.

Korean companies that have already entered China have to consider the possibility of a setback in their exports to the U.S. Over the long term, they might change their production bases or come up with ways to increase sales in the domestic market of China.

The U.S.-China trade dispute deals a direct blow to Korea, which depends on the two major economies for nearly 40 percent of its total outbound shipments. It will be necessary for Korea to diversify its export market and overhaul its fundamental economic structure so as to be less susceptible to external shocks.