ⓒ YONHAP News

COVID-19 is showing signs of spreading again, casting clouds over the global economy. Another negative factor that makes the already struggling economy even more difficult is the ever-intensifying tug-of-war between the U.S. and China.

On August 17, the U.S. Department of Commerce announced that it would impose further sanctions on Huawei. The tighter restrictions are seen as a move to block almost all semiconductor companies in the world from trading with the Chinese tech giant. Meanwhile, U.S. President Donald Trump has postponed trade negotiations with China and made it clear that the U.S. will not hold discussions with China for the time being.

Here is Professor Kim Gwang-seok at Hanyang University Graduate School of International Studies to examine the deepening conflict between the U.S. and China and its potential influence on the Korean economy.

I’d say the U.S. has “bashed” Huawei twice to drag down the Chinese company. Huawei has 38 subsidiaries in 21 countries. The recent restrictions make it even more difficult for those subsidiaries to secure chips made with U.S. software or technology. In other words, the U.S. is further restricting Huawei access to American technology.

U.S. Secretary of State Mike Pompeo says that the new sanctions are necessary to protect U.S. national security and citizens’ privacy. The U.S. apparently wants to block Huawei from collecting big data on the U.S. using its telecommunications equipment and technology so China will not have a military advantage. The phrase “national security” can be fully understood in this context.

The new rule is so specific that it has plugged any loophole that Huawei might exploit. When its chips are out of stock, Huawei will no longer function properly as a leading manufacturer of 5G network equipment and smartphones.

The U.S. imposes such strong sanctions on the Chinese firm because it competes with China in international standards for 5G networks, with the two superpowers fighting for global tech hegemony.

Before the new restrictions on Huawei, the U.S.-China conflict also arose over the Chinese video app TikTok. The app allows users to tell their stories in short videos lasting 15 seconds. The extremely popular social media platform surpassed two billion downloads worldwide, with 165 million downloads in the U.S. alone.

TikTok has more than one billion users in some 150 countries around the world, including 40 million in the U.S.  It came in fourth in the list of most downloaded iPhone apps in 2019. Launched in September 2016 by Chinese IT firm ByteDance, the video-sharing app symbolizes China’s rise as a technology powerhouse, along with Huawei.

The U.S. wants to remove it from the market, citing the need for protecting personal information of U.S. citizens. It believes that the app, if used by the U.S. military, could expose the location of American troops and personal information to the Chinese government. That’s why the U.S. takes issue with the Chinese social media app.

Meanwhile, on August 18, Trump said that he decided to delay trade talks with China. The U.S. and China were previously scheduled to review their implementation of the first-phase trade agreement, which went into effect in February, every six months. Their first high-level meeting was initially to take place on August 15 in the form of a video conference, but it has been postponed indefinitely. While the two countries have clashed over many issues, including diplomacy, security, human rights and intellectual property rights, the phase-one trade deal is believed to have played a bridging role in connecting the two sides. But now, Trump suggests the possibility of canceling the deal altogether.

It seems both the U.S. and China thought that it wouldn’t be helpful or meaningful to hold the meeting at this time. Trump continues to take a harsh stance toward China, as seen in his pressure on TikTok to sell its U.S. operations to an American company by September 15th. Both the U.S. and China need more time probably to take the upper hand in future negotiations.

Trump has also hinted at the possibility of enforcing restrictions against another Chinese company. Some speculate that the next target could be Alibaba, the Chinese e-commerce giant, considering that the move will maximize the symbolic significance of Washington’s offensive against Beijing.

However, the U.S. administration’s strong and consistent clampdown on Chinese firms is expected to deal a serious blow not only to Chinese companies but to American ones as well.

Since the COVID-19 outbreak, U.S. officials have maintained a hawkish stance on China in trade and the economy as well as in diplomacy and security. Their attack on Chinese tech firms may continue until the U.S. presidential election.

But the U.S.’ continuous “China-bashing” may cause damage to its own tech companies. If the Trump administration orders Apple to remove Chinese apps such as TikTok and WeChat, for example, consumers in China don’t need to buy iPhones, while global iPhone sales will decrease 25 to 30 percent. Of course, China will vehemently protest the move at the government level. In the course of making Chinese companies suffer, the U.S. may deliver a blow to its own firms.

So, how will the U.S. restrictions against Huawei influence South Korean companies? Huawei is a major buyer of Korean semiconductors, but it also competes with Korean firms in the global smartphone market. While some industries may be fortunate enough to benefit from the U.S.-China conflict and others might not, many analysts are calling for Korea to pioneer a niche market in a proactive way.

South Korea should use more proactive measures to foster promising industries, such as remote learning, telemedicine, digital healthcare and mobility. Korea has already been ahead of others in convergence products like home appliances that bring different functions together. It could make the most of its technological competitiveness to replace Chinese firms in those promising industries.

The U.S. and China account for a combined nearly 40 percent of South Korea’s exports. Korea is in a tricky position as a result of the fierce battle between two of the world’s largest economies. Seoul needs to devise a diplomatic strategy to avoid taking sides and maintain a balance between the two so their hegemonic rivalry will not deal an economic blow to Korea.

Amid the deepening conflict between the U.S. and China, South Korea is growing increasingly anxious as both countries are Korea’s important partners in terms of security and the economy. The U.S. is expected to step up pressure on Korea to join its anti-China campaign.

It seems necessary for Korea to come up with more strategic countermeasures on diplomatic and economic fronts.