The International Monetary Fund (IMF) said in its report that the potential trade agreement between the United States and China is likely to include managed trade elements, that is, purchases from each other, the agreement is expected to contribute to the global economy in the form of lower tariffs and reduced policy uncertainties, and yet exports from South Korea, Japan and the European Union to China can be adversely affected if China significantly increases its U.S. product imports in order to reduce its large trade surplus with the United States.
“Assuming that China will reduce the surplus to zero by importing more automobiles, machinery, electronic products, and the like from the United States, US$61 billion of EU exports to China will be affected and the figures will amount to US$54 billion and US$46 billion for Japan and South Korea, respectively,” the IMF explained, adding, “The decrease in exports in that case will be equivalent to 3 percent of the GDP in the case of South Korea and approximately 1 percent in each of Germany and Japan.”
The IMF also said that the assumption is related to China’s top 10 import items in relation to the United States, the impacts on the European Union, Japan and South Korea do not decrease even in other analyses covering every import item, and the impact on South Korea is equivalent to 2 percent to 3 percent of its GDP in most scenarios.
