China and South Korea, two of East Asia’s largest economies, are facing a renewed test of their trade relationship as U.S. President Donald Trump doubles down on his protectionist policies. With Trump’s administration pushing for more tariffs and trade barriers, economic analysts quoted by SCMP predict that China and South Korea may have no choice but to forge stronger economic ties to shield themselves from the fallout.

While Beijing and Seoul have enjoyed extensive trade relations worth billions of dollars, their economic partnership has been fraught with geopolitical tensions, including the deployment of the U.S. Terminal High Altitude Area Defense (THAAD) system in South Korea. However, the growing uncertainty over U.S. trade policy, particularly Trump’s aggressive push to impose higher tariffs on imports, is expected to drive both countries toward deeper economic integration.

“In the Trump 2.0 era, with protectionism intensifying, South Korea and China must work together to ensure that free and fair trade continues in the region,” said Hyuntai Lee, an associate professor of international studies at Seoul National University.

With Trump’s return, some experts believe that Washington’s trade war may end up hurting the U.S. economy itself, as affected countries seek alternative trade routes to bypass American tariffs.

Trump’s protectionist stance has already triggered a shift in global trade dynamics. During his first term, his administration launched sweeping tariffs on Chinese goods, escalating a trade war that disrupted global supply chains. His second term is expected to follow a similar path, affecting other Asian powerhouses, and potentially forcing nations like South Korea and Japan to reevaluate their trade policies and deepen ties with China to offset losses.

“I’m expecting a bigger room for China and South Korea to cooperate in the Trump era,” said Huang Rihan, a professor of international relations at Huaqiao University. “Trump doesn’t really value allies.”

Huang noted that Trump’s rhetoric against South Korea’s trade policies, particularly his accusations in early March that Seoul was imposing unfair tariffs on American goods, had already created tensions between the two allies.

“This is a very important signal,” Huang added, pointing out that many South Korean experts are concerned about the unpredictability of Washington’s economic strategy under Trump’s leadership.

China’s Push for Stronger Trade Agreements in East Asia

Beijing has been actively working to solidify economic ties in the region, pushing for a trilateral free trade agreement between China, Japan, and South Korea. The three economies, which account for nearly 25% of global GDP, are already members of the China-led Regional Comprehensive Economic Partnership (RCEP), the world’s largest trade pact.

South Korea, one of the few developed nations to have signed a free trade agreement with China, finds itself increasingly reliant on trade with its neighbor. In 2024, China-South Korea trade rose 5.6% year-on-year, reaching $328.1 billion, surpassing China’s total trade with all 54 African nations combined.

But while economic interdependence is growing, South Korea remains caught in a complex web of geopolitical pressures. The U.S. has been pushing Seoul to join initiatives aimed at countering China’s dominance in key industries, such as the Chip 4 alliance and the Indo-Pacific Economic Framework. Yet, despite these pressures, China remains South Korea’s largest trading partner, making it difficult for Seoul to take sides in the growing U.S.-China rivalry.

Will the U.S. Be the Biggest Loser in Trump’s Trade War?

Many economists believe Trump’s protectionist policies could ultimately backfire, as targeted countries look elsewhere to form new trade partnerships.

South Korea, as an export-driven economy, has little choice but to participate in regional trade agreements that reduce its dependence on U.S. markets.

“As a country highly dependent on global trade, [South] Korea has no choice but to participate in such multilateral cooperation frameworks,” Lee said.

Trump’s tariffs, which are meant to protect American industries, could have unintended consequences. By forcing countries to seek alternative markets, the U.S. could end up isolating itself from global trade networks, a scenario that many economists warn could hurt American businesses in the long term.

South Korean Industries Face Rising Competition from China

Even as China and South Korea explore stronger trade ties, South Korean businesses remain wary of Beijing’s rapid advancements in critical industries.

“The sense of crisis among Korean companies is increasing due to China’s improved technological capabilities. This competitive landscape is indeed a factor limiting cooperation between the two countries,” said Lee.

South Korea’s once-dominant automobile and electronics industries have been losing ground to Chinese competitors. Hyundai and Kia have seen their market share eroded by Chinese electric vehicle manufacturers, while Chinese brands Hisense and TCL overtook Samsung and LG in global television sales for the first time in late 2024.

Chinese shipbuilders now command 70% of global orders for new commercial vessels, compared to South Korea’s 17%. Meanwhile, a government study in Seoul found that China has surpassed South Korea in 136 key technologies, including semiconductor manufacturing.

What’s Next for China-South Korea Trade Relations?

As both countries navigate the uncertainties of a second Trump term, efforts are underway to modernize their 2015 free trade agreement.

“In the phase 2 negotiations, [South] Korea aims to expand market liberalization in service sectors such as entertainment and tourism,” said Junha Kang, a law professor at Hongik University in Seoul and a government trade adviser.

“Both sides need to address non-tariff barriers and improve trade transparency to facilitate smoother transactions.”

Yet, uncertainty looms over whether Japan and South Korea will move forward with deeper trade agreements with China, given Washington’s pressure.

“The U.S. geopolitical alignments with Korea and Japan undoubtedly add complexity to trilateral relations among China, Korea, and Japan,” Kang said.

Can Cultural Exchanges Ease Economic Tensions?

Despite economic and political challenges, Beijing has been encouraged to promote greater people-to-people exchanges with South Korea.

During a February meeting with President Xi Jinping, South Korea’s National Assembly Speaker Woo Won-shik invited Xi for a state visit in November, coinciding with the APEC Summit.

But a key question remains: Will China open its doors to more South Korean cultural exports?

“It’s hard to imagine Beijing making it easy,” said Lee of Seoul National University. “But more cultural exchanges and loosened visa policies might help build trust.”

“The recent move to expand cultural exchanges is a positive sign,” he added. “High-level dialogue channels and institutional mechanisms for cultural content exchange are crucial.”

In 2023, I wrote that if Nigeria removes fuel subsidies, companies which typically use the national uniform pricing model may have to go region-based pricing. In other words, if the petroleum equalization fund which used to make the prices of petrol uniform across Nigeria goes, making it possible that the price of petrol in Sokoto would be different from the price in Lagos, no one should expect companies to offer services like telecom at the same national price point in Lagos and Sokoto.

Today, we are reading that the playbook is loading: “Telecommunications operators in Nigeria are pushing for a shift from the existing uniform national tariff structure to a regional tariff regime, which would allow them to adjust pricing based on operational challenges in different states.”

Later in 2024, I wrote: ‘Good People, Nigeria is attaining Energy Federalism (not fiscal federalism) and the implications are massive. In an upcoming speech titled “Energy Federalism and Reshaping of Nigeria’s Regional Comparative Advantages”,  I will explain how muting the Petroleum Equalisation Funds (PEF) and Petroleum Products Pricing Regulatory Agency (PPPRA) will reshape regions in Nigeria’.

But there is nothing to panic because there is a solution: give the telcos what they want, but make it clear that those in high density cities like Lagos and PHC must pay more, and demand they will use that to compensate in other parts of the country. For example, a 2GB data bill could cost N2,200 in Lagos (extra N100) and that extra enables a telco to sell to someone in Sokoto at N2,000 when optimally both would have been billed each N2,100.

Nigeria’s economy is being redesigned regionally. The challenge is that opportunities are not well distributed regionally, and that is why the reforms would affect some regions in bad ways. Lagos has three seaports with another on the way when no other city has an active one or even a deep seaport.

That is an asymmetric positioning which pushes the importer from Aba to spend an additional N6 million to truck a container from Lagos to Aba. But if we say we have a deep seaport in Akwa Ibom, even someone from Maiduguri will save at least 30% on the trucking fee compared with Lagos’. So, what the telcos are asking may not be fair considering that those which do not even have means to pay may be expected to pay more. Yet, you do not blame private companies for a lack of a national economic development plan that supports all regions uniformly.

The International Monetary Fund (IMF) has recently updated its guidelines to include provisions for cryptocurrencies, marking a significant step in recognizing digital assets within its global financial framework. On March 20, 2025, the IMF released the seventh edition of its Balance of Payments and International Investment Position Manual (BPM7), which formally incorporates cryptocurrencies like Bitcoin and other digital assets into its statistical standards for tracking economic activity and cross-border transactions. This is the first time the IMF has explicitly addressed crypto.

The updated guidelines classify digital assets based on their characteristics. For instance, cryptocurrencies such as Bitcoin, which have no underlying liabilities or issuer, are categorized as “non-produced, non-financial assets” (akin to capital assets). In contrast, stablecoins or other tokens backed by liabilities are treated as financial instruments. The BPM7 also provides guidance on recording complex crypto-related activities, such as mining and staking, as well as cross-border transfers of digital assets, reflecting their growing role in the global economy.

This move signals the IMF’s acknowledgment of the increasing economic impact of cryptocurrencies and aims to standardize how countries report these assets in their balance of payments statistics. It’s a practical step toward integrating digital assets into macroeconomic monitoring, though it aligns with the IMF’s broader stance that crypto should not be granted official currency or legal tender status, as reiterated in prior policy statements. Instead, the focus is on tracking and managing their implications for financial stability and international transactions.

The inclusion of cryptocurrencies in the IMF’s updated Balance of Payments and International Investment Position Manual (BPM7) carries several significant implications for the global financial system, national economies, and the crypto ecosystem. Countries will now be expected to report crypto-related transactions—such as cross-border transfers, mining rewards, or staking income—in their balance of payments statistics. This increases visibility into how digital assets flow through economies.

Policymakers and regulators gain better data to assess the scale of crypto activity, potentially leading to more informed monetary and fiscal policies. It could also expose previously hidden economic activity, especially in nations with high crypto adoption. By formally recognizing cryptocurrencies in its statistical framework, the IMF is indirectly validating their role in the modern economy, even if it stops short of endorsing them as official currencies. This could encourage governments and financial institutions to take crypto more seriously, potentially accelerating mainstream adoption.

The guidelines provide a blueprint for classifying and reporting crypto assets (e.g., Bitcoin as a non-financial asset, stablecoins as financial instruments), which could push countries toward harmonized regulatory approaches. Nations with lax or no crypto regulations might face pressure to align with IMF standards, especially if they seek IMF assistance or want to maintain credibility in global markets. This could lead to tighter oversight, taxation, or anti-money laundering (AML) measures.

Countries where crypto is widely used (e.g., El Salvador, which adopted Bitcoin as legal tender) will need to reconcile their domestic policies with IMF reporting requirements, despite the IMF’s opposition to crypto as legal tender. This could create tension between national sovereignty and international expectations, potentially affecting IMF loan conditions or economic assessments for such countries. The IMF has long warned about crypto’s potential to destabilize economies—through capital flight, tax evasion, or undermining monetary policy—and these guidelines allow it to monitor those risks more closely.

If significant crypto outflows or volatility are detected, the IMF might push for stricter capital controls or recommend policies to mitigate systemic risks, influencing how nations manage digital assets. Clear classifications and reporting standards reduce uncertainty for banks, payment processors, and other financial institutions dealing with crypto. This could pave the way for greater institutional participation in the crypto market, such as custody services or cross-border payment solutions, driving further growth in the sector.

While the BPM7 focuses on measurement rather than policy, it sets a foundation for future IMF recommendations on crypto governance. Over time, this could shape global norms around crypto regulation, taxation, and integration into traditional finance, potentially influencing debates about central bank digital currencies (CBDCs) versus decentralized cryptocurrencies.

The IMF’s updated guidelines mark a pragmatic acknowledgment of crypto’s permanence in the global economy, but they also signal a push for control and oversight. The implications range from improved economic data to heightened regulatory scrutiny, with ripple effects for governments, businesses, and crypto users worldwide. The tension between innovation and stability will likely define how these changes play out in practice.