World Economy

Trump hints at stopping trade with countries that do business with North Korea after nuclear test

Key Points
  • Among countries that would be affected are India, Russia, and Pakistan, but most importantly China.
  • China is also one of the U.S.' largest trading partners, and a lifeline to the North Korean regime
  • Trump's tweet came just hours after North Korean state television said the isolationist country successfully tested a hydrogen bomb
Getty Images

President Donald Trump took to Twitter on Sunday to say the U.S. is considering slapping a trade embargo on countries that currently do business with North Korea.

So as the world grapples with its Herculean effort to mitigate Pyongyang's threat, exactly how much is at stake?

To be sure, North Korea has a small impact on world trade flows, ranking as the 119th largest export economy in the world, according to MIT's Observatory of Economic Complexity. The communist nation exports just shy of $3 billion worth of goods per year, which include items like coal, petroleum and retail. The country relies heavily on imports totaling nearly $3.5 billion, MIT data show.

However, a few large economies do business with both the U.S. and North Korea. Among these countries are India, Russia, and Pakistan, all of which have strong bilateral ties to the U.S. Most importantly China, North Korea's largest trading partner, looms large in any retaliatory effort. In 2015, China accounted for approximately 85 percent of North Korea's overall trade volume, according to data from the United Nations Comtrade database.

In fact, China, India and Pakistan are North Korea's top three export destinations, MIT figures state, while the Chinese, Indians, Russians and Thais are North Korea's top importers.

Meanwhile, there's little doubt America itself could sustain a substantial economic hit. China is also one of the U.S.' largest trading partners. In 2016, the U.S. imported $462.62 billion in Chinese goods and exported $115.6 billion in goods to China, according to the International Trade Administration — an imbalance Trump has vowed to rectify one way or another.

China under the spotlight

America's relationship with China is already strained, while diplomatic ties to Russia are all but frayed in the aftermath of the contentious 2016 election. With those factors as a backdrop, economists say the U.S. can ill-afford to engage in a trade war with not just one but two major economies.

The U.S. president has repeatedly hit China for not being tough enough on North Korea, while employing protectionist rhetoric to blast what he perceives is China's lopsided trade relationship with America. On Sunday morning, Trump said China "is trying to help but with little success."

Yet the president has on occasion lashed out in stronger terms, hinting that Beijing could pay a stiff price for being either unwilling or unable to sway Pyongyang. On June 29, Trump tweeted that China does "could easily solve this problem!"

Trump's tweet came just hours after North Korean state television said the isolationist country successfully tested a hydrogen bomb that can be mounted onto an intercontinental ballistic missile. This was North Korea's sixth nuclear test since 2006 and its most powerful to date.

Tension between the U.S. and North Korea has been escalating recently, amplifying the threat of economic reprisals. Last month, Trump said threats out of North Korea "will be met with fire and fury." Last week, meanwhile, North Korea launched a missile that flew over Japan before falling into the sea.