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Smartphone Prices Could Increase And Global Trade Could Be Disrupted By A War With North Korea

Smartphone Prices Could Increase And Global Trade Could Be Disrupted By A War With North Korea
Among the major consequences from a potential war on the Korean Peninsula are pricier consumer electronics, disrupted global trade and higher U.S. federal debt, according to a new report from economic research consultancy Capital Economics.
In their quest to halt the rogue nation's nuclear development but many believe the risk of military action has grown, the prospect of American and South Korean armed forces entering full-blown conflict against North Korea is a last resort for Washington and Seoul which are the principal targets of Pyongyang’s nuclear aggression.
“A major conflict” with North Korea was possible and that all options were on the table, U.S. President Donald Trump has previously stated. And as the isolated state continues to fire ballistic missiles that are growing technologically advanced, the international community must “firmly and solidly stand upon the principle of action for action”, Japanese Prime Minister Shinzo Abe recently said.
Given the likely possibility of U.S. involvement and the size of South Korea's economic footprint, global industries will certainly be impacted if military action does break out on the Korean Peninsula.
According to Capital Economics, accounting for just over 6 percent of global production, South Korea is the world’s fourth biggest producer of electronics goods on a value-added basis. "Even a relatively short conflict would deal catastrophic damage to South Korea's economy," the report stated, and the manufacturing sector isn't likely to be spared.
The report explained that the global economy lacks enough spare capacity to compensate for South Korea's lost output, in case companies start scrambling to find alternative suppliers when a wat=r with North Korea damages electronics production in South Korea.
Capital Economics said that his could result in sharp rise of various electronic products globally as several companies worldwide would be forced to halt production.
But pricier products could impact developed economies.
"U.S. spending on electronic items, including smart phones, cameras, tablets and computers accounts for roughly 1 percent of the consumer price inflation basket. If a war in Korea caused prices of these items to double, it would add 1 percentage point to U.S. inflation," the report warned.
The report continued that the real purchasing power of consumers would fall as other industrialized nations encounter similar impacts. This could be attempted to be tackled by increasing interest rates by central banks. Ultimately global trade will be disrupted
"The biggest impact (of war) on the global economy would likely be felt through the disruption to global trade flows" due to South Korea's deep integration into regional and global manufacturing supply-chains, Capital Economics stated.
Capital Economics continued that even countries that aren't involved in the conflict could be affected if it becomes too dangerous to transport goods around the region because nine of the world’s ten busiest container ports are located in Asia, including the South Korean port city of Busan.
The consultancy noted that one percentage point from global GDP could be knocked off if South Korean GDP fell 50 percent as a result of war.

Christopher J. Mitchell

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