Trade war: China’s large market the big loophole in US ‘friendshoring’

With its strength in critical sectors like batteries and chips, South Korea’s suitability as a friendly shore is compromised by its companies’ dependence on Chinese inputs and demand

Extending China waivers for Korean companies, as the US has done, only undermines its own industry policy

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A woman walks past an advertisement for Samsung Galaxy Z Flip5 phone at an underground shopping area in Seoul on October 11. In a major concession to Seoul, Washington has granted both Samsung and Hynix an indefinite waiver on broad restrictions to export advanced chip-making equipment to the mainland. Photo: AFP

Akhil Ramesh

Akhil Ramesh is director of the India Programme and Economic Statecraft Initiative at the Pacific Forum.

Published: 8:30pm, 11 Oct 2023Updated: 4:24pm, 12 Oct 2023

As US-China trade tensions persist, supply chain diversification is seriously under discussion. Terms such as “nearshoring”, “friendshoring” and “China plus one” have become part of the foreign policy lexicon.

In particular, the Biden administration’s review of supply chains highlighted vulnerabilities in four critical sectors – pharmaceuticals, critical minerals, electric vehicle batteries and semiconductors – and emphasised diversification methods such as partnerships with allies such as Japan and South Korea.

The US has little to no competitive advantage in the EV battery space, where South Korean manufacturers LG Energy Solution, SK On and Samsung SDI are among the world’s top 10 producers by market share and in keen competition with Chinese behemoths such as Contemporary Amperex Technology (CATL).

While Japan’s Panasonic remains a major player, Korean manufacturers have steadily grown in importance.