Invest1 publisher2 min readPublished
Korea's China route into US demand shrank faster than its ASEAN route grew
A Bank of Korea note tracks Korean value added on its way to American buyers. Between 2016 and 2022 the share moving through Southeast Asia rose by less than the share through China fell, while direct shipments held near three-quarters.
The Investor · Invest desk
What happened
- Direct trade between the United States and China fell about 40% in 2025 from 2022, while global trade kept expanding as flows moved through connector countries such as Vietnam, India and Mexico.
- A Bank of Korea issue note presented on the 11th concluded that supply chains are being restructured by changing trade routes, not by the wholesale bloc formation of the Cold War.
- The researchers warned that if Washington tightens rules of origin or steps up transshipment investigations, the impact would reach Korean companies through ASEAN production networks.
Compiled by The InvestorSomething wrong?How this is made
Why it matters
- exposure An origin or transshipment case lands on Korean chipmakers whose goods enter the United States as Vietnamese output, so the liability sits with suppliers two steps back from the customs line.
- constraint Because the routing series stops in 2022, anyone pricing 2025 transshipment risk is working from a picture drawn before the tariffs that produced the bilateral decline.
- decision The central bank's advice against depending on a single production base puts a capital-spending question to Korean firms that have already concentrated processing in Vietnam.
The ASEAN gain and the China loss are close to the same size. The five major ASEAN economies carried 8.3% of Korean value added serving US final demand in 2022, up from 4.9% in 2016 [10], and China's share of the same flow fell to 6.8% from 10.7% [11]. That is a gain of 3.4 points against a loss of 3.9 [1][2]. Add the two intermediated routes together and they came to 15.1% in 2022 against 15.6% six years earlier [3]. Shipments going straight from Korea to a US buyer held at around 73% [12], and roughly 12% of the flow arrives by some other path [9].
A rules-of-origin case bites on the intermediated share. In 2022 the ASEAN part of that share was 8.3%, against a direct channel about nine times larger [4]. The Bank of Korea describes the pattern as Korean chips and electronic intermediate goods produced and processed in Vietnam before being supplied to the US and Chinese markets [9].
Within semiconductors and electronics, both destinations gained the same amount between 2016 and 2022: 8.2 points each [5]. Combined, US and Chinese final demand accounted for 40.4% of the value added in Korean semiconductor and electronics exports to Vietnam in 2022, up from 24.0% [7]. Across Korean exports to Vietnam as a whole, the combined figure was 32.4%, from 18.4% [6].
The value-added figures end in 2022 [10]. The fall in direct US-China trade is measured from 2022 to 2025 [2], so the routing evidence stops in the year the bilateral decline starts [8]. The 8.3% is a pre-tariff number.
On what to do about it, the note is brief. "Connector countries should be used as a buffer zone for supply chains, but a diversification strategy is needed to reduce dependence on any single country or production base," the Bank of Korea said [14].
In my view the enforcement risk is larger than 8.3% implies, because the growth sits in the processed-electronics chain, where the US-demand share rose 1.64 times and the Chinese-demand share 1.73 times over the six years [10]. The counter-case is straightforward. Around 73% of Korea's US-bound value added never passes through a third country [12], so an origin fight over a channel a ninth that size moves the tariff bill at the margin and no further. A 2023-2025 vintage of the same table would settle which.
What to watch
- A 2023-2025 vintage of the Bank of Korea's value-added table: an ASEAN channel well above 8.3% would rescale the transshipment exposure.
- Any US tightening of rules of origin, or a transshipment case that names ASEAN-processed electronics.
- Whether the direct Korea-to-US share moves off around 73% in the next reading.