Issue Preventing Chinese circumvention from becoming a Korea-US trade dispute

Summary

With the US tightening its rules against Chinese circumvention, the report urges Korea to strengthen measures so that its economy is not harmed by rerouted Chinese goods. The first priority is to keep the problem from escalating into a Korea-US trade dispute by stepping up monitoring and trade consultations with Washington. Washington already has ample tools to police circumvention through Chinese-invested firms in Korea, including the BIS 50 percent rule and the exclusion from chip and IRA subsidies of companies tied to foreign entities of concern. Recent Chinese investment in Korea's battery sector could be linked, directly or indirectly, to such circumvention and deserves caution. The authors warn that US measures could extend to Chinese subsidiaries in Korea and to batteries using Chinese parts, so component flows need closer monitoring and cooperation with listed Chinese firms requires care.