On July 8, the Korean government said it would work with Washington to deploy the Terminal High Altitude Area Defense system (THAAD) at an American military base in South Korea, to counter an attack from the North.
Chinese Foreign Minister Wang Yi met Sunday with counterpart Yun Byung-se for the first time since the news, while visiting Laos. Wang complained that South Korea's recent decisions had hurt the foundation of mutual trust between the two countries. China time and again had opposed the THAAD deployment, saying the radar could cover Beijing and hurt its security interests, but South Korea had proceeded regardless.
At the Asia-Europe Meeting held in Mongolia July 15-16, President Park Geun-hye and Chinese Premier Li Keqiang apparently had no meaningful exchanges -- perhaps as they tried to avoid discussion of touchy issues such as the South China Sea dispute and THAAD. In one fell swoop, bilateral relations have clearly grown more complicated than in the past few years.
Many had been concerned for some time about the potential fallout. On July 8, stocks of cosmetics maker Amorepacific and LG Household & Health Care plunged, on worries that sales may languish in the key Chinese market.
And remarks July 13 by Yoo Il-ho, the South Korean deputy prime minister and minister of strategy and finance, fanned worries even more. He said China could erect more nontariff trade barriers. Many news agencies have outlined the possible scenarios of a Beijing counterattack.
One precedent always cited is the so-called garlic issue from 2000. To protect domestically grown varieties, South Korea increased tariffs on Chinese frozen garlic more than 10-fold from 30%. China immediately responded by suspending imports of South Korean mobile phones and polyethylene. Seoul had no choice but to bring the garlic tariff back down.
This time around, automotive batteries could be targeted. Samsung Electronics and LG Electronics set up Chinese plants for such batteries last year but have not obtained certification from Chinese authorities. And now, Beijing is trying to introduce a rule that electric vehicles loaded with batteries produced at uncertified facilities will not qualify for subsidies. This could throw a monkey wrench into investment plans.
The impact could be extensive. On Monday, the leftist news agency Hankyoreh reported online that many bilateral exchange events are being canceled, perhaps due to the THAAD agreement.
The city of Daegu in central Korea, which hosts an annual chicken and beer festival, was notified at the last minute that its Chinese sister city Qingdao would skip this year's event, which started Wednesday. In addition, Qingdao apparently advised Daegu that it would not be welcome at its own beer festival, which is in August.
Beyond specific events, Chinese tourism to South Korea may drop off, with China possibly imposing a travel restriction on its citizens.
China is South Korea's biggest trading partner. Korean exports are already sluggish due to the slowing Chinese economy. If these concerns come to pass, the blow will be severe.
The apprehension may extend beyond the economy. Asia's biggest economy has historically had a tremendous influence on South Korea. Some 47% of respondents there picked China as the most important country with which to keep relations -- 7 percentage points higher than the U.S., the No. 2 choice, in a poll conducted by the Japanese think tank Genron NPO and South Korea's East Asia Institute.