Bank of Korea’s Rhee says US-China trade talks important for Asia

[SEOUL] Bank of Korea (BOK) governor Rhee Chang-yong said the outcome of trade negotiations between the US and China will have an impact on all of Asia’s economies, highlighting their significance beyond the bilateral level.

“When we actually measure the impact of US tariffs on us, the indirect impact through China is very important because we are very much connected with them through supply chains,” Rhee said referring to South Korea at a BOK event in Seoul on Monday (Jun 2).

The governor said other economies also needed to factor in the US-China element when assessing the hit from the US levies.

“How the negotiations between the US and China will go is also important for Asian economies in general,” Rhee said.

The comments underline the concerns among policymakers throughout the region on the outcome of talks between Washington and Beijing, given the interconnectedness of Asia’s economies and the large role China plays in driving regional growth.

Rhee was speaking at a BOK conference that also featured US Federal Reserve governor Christopher Waller.

In his comments, Waller had indicated that 10 per cent tariffs may be manageable for businesses in the US as he talked about the likely scenarios that could play out.

“Many businessmen here also say 10 per cent is manageable,” Rhee said, while flagging the importance of Trump’s non-reciprocal levies.

Rhee said sectoral tariffs were just as important as reciprocal levies for South Korea given the high levels of its exports of semiconductors, steel, aluminium and cars. items that are all subject to separate duties.

“Sectoral tariffs and what’s going to happen after Jul 9 is one of the key issues here,” he said.

Inflation expectations

Following up on Waller’s comment that he focuses on market-based measures of inflation expectations, rather than volatile household surveys, Rhee offered a different view. The BOK governor said that Korea’s market-based measures are harder to interpret due to limited market depth.

“Our market measure is quite hard to use directly because our market is quite shallow,” Rhee said, adding that prices often respond more to shifts in liquidity than to actual changes in expectations. BLOOMBERG