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Heterogeneous impacts of the U.S.-China trade war on Korea: What drives industry differences?

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  • Lim, Heehyun

Abstract

This paper analyzes how the U.S.-China trade war affected Korean industries and identifies the industry characteristics that determined which industries gained or lost. I show that heterogeneity in responses is closely linked to capital intensity and export intensity, highlighting the role of economies of scale and export readiness. Using detailed industry-level data from Korean manufacturing, the analysis finds that capital-intensive industries with substantial pre-war investments and industries with high export intensity achieved greater growth and cost reductions following the tariff shocks. These findings indicate that industries positioned to expand their scale captured the gains, while others were left behind, emphasizing the importance of targeted and differentiated policy support for pre-investment, capital deepening, and export infrastructure ultimately to enable more industries to leverage external trade disruptions as opportunities for sustained growth.

Suggested Citation

  • Lim, Heehyun, 2025. "Heterogeneous impacts of the U.S.-China trade war on Korea: What drives industry differences?," KDI Journal of Economic Policy, Korea Development Institute (KDI), vol. 47(4), pages 73-129.
    • Handle: RePEc:zbw:kdijep:335564
    DOI: 10.23895/kdijep.2025.47.4.73
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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