The Effects of U.S. Export Sanctions on South Korea’s Global Value Chains Participation

Purpose – This study investigates the impact of U.S. export sanctions on South Korea’s participation in global value chains (GVCs). While South Korea has never imposed unilateral sanctions on specific countries, the U.S. has been the most active user of such measures since 2000. Given South Korea’s strong economic and trade dependence on the U.S., this study examines the indirect effects of U.S. export sanctions on South Korea's GVC linkages with sanctioned countries. Design/Methodology – The empirical analysis draws on two main data sources: the Global Sanctions Database, which provides detailed information on sanctions between countries, and the World Integrated Trade Solutions, which offers product-level bilateral trade data. To capture GVC participation, the United Nations’ Broad Economic Categories classification is used to categorize exported goods by their processing stage. Within this framework, the effects of U.S. export sanctions on South Korea’s GVC participation are estimated using multiple estimation methods. Findings – The results show that U.S. export sanctions significantly reduce South Korea’s GVC participation with sanctioned countries, particularly in exports of intermediate and capital goods during sanction periods. An event study on U.S. export sanctions on China from 2017 to 2023 further reveals a redirection of South Korea’s intermediate and capital goods exports to other countries. Originality/value – Given the U.S.’s continued and intensifying use of unilateral export sanctions, our findings suggest that South Korea’s GVC participation—especially at the intermediate stage—is likely to become increasingly constrained in sanctioned countries. However, these results also indicate a potential regional shift, with South Korea’s GVC activities gradually redirecting toward third countries in response to ongoing U.S. sanctions.