SEOUL — U.S. Treasury Secretary Janet Yellen on Tuesday said deeper trade ties among allies could help fight inflation and thwart China’s “unfair trade practices,” vowing to impose harsh consequences on those who abuse the global economic order.
Yellen made the comments in a policy speech in Seoul after touring the facilities of South Korean tech heavyweight LG Corp during the final leg of her 11-day visit to the Indo-Pacific region.
“We cannot allow countries like China to use their market position in key raw materials, technologies or products to disrupt our economy and exercise unwanted geopolitical leverage,” Yellen said.
Instead, the United States and allies like South Korea should focus on “friend-shoring,” or diversifying their supply chains to rely more on trusted trading partners, strengthening economic resilience and lowering risks, she said.
The United States is pushing for closer trade ties with South Korea and other trusted allies to improve the resilience of supply chains, and avert possible manipulation by geopolitical rivals, Yellen told Reuters on Monday.
Western powers have raced to end their dependence on China as a key supplier since the start of the COVID-19 pandemic, which exposed the fragility of global supply chains and laid bare gaps in domestic capacities in key sectors.
Yellen also took aim at Russia over its war in Ukraine, which Moscow describes as a “special military operation,” and continued to press for adoption of a price cap on Russian oil.
“Economic integration has been weaponised by Russia,” she said, decrying the impact of the war on supply chain vulnerabilities, as well as logjams and shortages that have driven prices higher around the world.
“We will impose harsh consequences on those countries that abuse or break that order, as we have demonstrated with our unprecedented response to Russia’s aggression.”
Yellen has said she will discuss the oil price cap proposal with top officials in Seoul.
Friend-shoring offered the United States and its allies a way to preserve the best features of the rules-based global order, while addressing unfair Chinese trade practices and ensuring access to vital inputs and products – from medicine to semiconductors and electric vehicle batteries, she said.
Yellen highlighted a series of investments that LG and other South Korean conglomerates such as Samsung recently made to expand the manufacturing of semiconductors and electric vehicle batteries in the United States.
She said the key to the new approach on trade required countries to properly account for and factor in the costs of overly concentrated supply chains, geopolitical concerns and value – rather than “overly focusing on costs.”
Yellen was hosted by LG Chem CEO Hak Cheol Shin in a tour of LG facilities in Seoul on Tuesday morning.
An avid collector of rocks, Yellen listened attentively as Shin explained the process of building electric vehicle batteries, including the need for lithium.
“The United States and the West in general are highly dependent on China not just for rare earths, but also a number of other strategic minerals like lithium and cobalt because China controls the supply chain,” said Luisa Moreno, president of rare earths firm Defense Metals.
“It is imperative for the U.S. and other industrial nations to develop critical materials supplies chains outside China,” Moreno said, adding the any effort to go it alone would be “expensive and increase the risk of failure.”
LG Chem, besides being the parent company of electric vehicle battery maker LG Energy Solution, also has battery materials and petrochemical businesses.
Yellen also spoke to a group of women entrepreneurs, telling them boosting women’s participation in the workforce and giving them more leadership opportunities would increase the economic potential of South Korea and the United States.
(Reporting by Andrea Shalal; Writing by Joyce Lee; Editing by Himani Sarkar and Stephen Coates)