January 15, 2026
SEOUL – The year 2026 has just started, and we are already witnessing great powers such as the United States and China exerting their influence on the rest of the world. The remainder of the year is likely to bring more of the same. Countries around the world, including Korea, are watching with apprehension the return of overt geoeconomic and military actions by these superpowers.
To understand this great power competition, it is helpful to think of three critical areas. First, the global financial system, in which the US remains the dominant player. Second, advanced manufacturing in specific areas such as semiconductors, where the great powers are competing intensely and Korea plays an increasingly important role. And third, basic manufacturing, in which China is the powerhouse.
The financial battleground
Let us start with finance. What was routinely considered the most boring part of the global financial architecture — payment systems and other basic financial services — has now become the center of intense geoeconomic competition. The United States’ ability to influence other countries via its control of the global financial system is unmatched. This ranges from sanctioning Iran and Russia to pressuring HSBC to disclose transactions tied to Huawei, and persuading SWIFT to disconnect various entities from its messaging system. The US and its allies control an overwhelming share of global financial services, exceeding 80 percent throughout the world. This dominant position makes finance one of the most powerful geoeconomic tools available to Washington.
However, the US position is more fragile than commonly understood. It is not lost on China that they need to develop their own payment and settlement system. They are doing precisely that with CIPS, the Cross-Border Interbank Payment System. A successful CIPS would both insulate China from possible US financial pressure and allow Beijing to offer the system to other countries that want to reduce their dependence on the US. Korea might be a natural country that wants access to both systems given its tight economic relationships with both the US and China.
While alternative payment systems remain poor substitutes for the global US-centric ones, they underscore the growing incentives to fragment the global financial system. Washington policymakers take comfort that the dollar is as central as ever — by some measures even more so. They argue that the Chinese renminbi and other alternatives are very unlikely to rival the dollar in most of its uses anytime soon. While this assessment is accurate, it also misses the crucial point.
Much of the loss to US power does not require the dollar being neck and neck with a competitor, but rather only the existence of a small viable alternative financial architecture. The US coalition, at present, can almost completely shut off the supply of financial services to a target country or corporation. The coalition’s power arises from the near-total ability to corner the market in these services, which are crucial for the functioning of all sectors of the economy. The target has little or no alternative. But power dissipates quickly as viable alternatives emerge, even if they serve only a fraction of global transactions.
The semiconductor chessboard
Let me now turn to semiconductors. Advanced semiconductors share some important features with the financial architecture. Like finance, they are a basic input in many different sectors of the economy, so controlling semiconductors can have far-reaching consequences. Somewhat in common with finance, they are not easy to produce, which means that controlling the main suppliers can leave the target with only poor alternatives.
But there are also important differences. Basic financial services are a relatively stable technology that has been around for a century. This technology changes and adapts — for example, with stablecoins and central bank digital currencies — but its main functions are well understood. Semiconductors are quite different. There is much uncertainty over which products will be needed for artificial intelligence and other advanced technologies, in large part because end uses like large language or world models are still in their infancy.
The supply chain of semiconductors is also much more dispersed across firms and countries than the basic financial architecture. This geographic and corporate fragmentation makes controlling the semiconductor industry more difficult in practice. Manufacturing requires cooperation between equipment suppliers in the Netherlands, materials producers in Japan, designers in the US, and fabricators in Taiwan and Korea. China is also scaling up its own domestic ability to produce advanced semiconductors,
Korea, with its large semiconductor firms such as Samsung and SK hynix, will have to navigate pressure from both China and the US regarding the dissemination of these products and control of intermediate steps of production. If Korea succeeds in keeping up with or even leapfrogging the manufacture of advanced semiconductors, it will substantially increase its geoeconomic potential.
First, both the US and China would have to carefully consider the reaction of Korean producers to any of their import and export control policies. Second, third-party countries might find Korea to be a valuable source of diversification in this critical input, reducing their overreliance on either the US at present or potentially China in the future.
The manufacturing and tariffs debacle
Let me finally turn to basic manufacturing. These products differ substantially from semiconductors because, generally, easy alternatives are available. Multiple countries can manufacture steel, textiles, consumer electronics, and other standard goods with relative ease. Buyers, therefore, are less afraid of losing access to any one producer. China has built a massive manufacturing base and is indeed one of the world’s largest exporter of such goods.
Chinese manufacturers have recently come under pressure from US tariffs and growing fears in many countries, particularly in Europe, of overreliance on Chinese inputs. This concern has been amplified by supply chain disruptions during the pandemic and geopolitical tensions. Tariff policies in these areas have been applied in a confusing and often contradictory fashion. They serve partly as a negotiation tool, partly stem from a misguided notion of a massive and direct effect on trade deficits, and partly aim to generate a manufacturing revival in the United States.
While I expect more action in this space throughout 2026, it is likely to be as chaotic and haphazard as what we witnessed in 2025. Korea, as a major exporter of automobiles and other manufactured goods, will be significantly affected by this uncertainty, with no obvious relief in sight. Korean manufacturers must prepare for a volatile trade environment where the rules can change with little notice and trade deals are short-lived.
Navigating the storm
For Korea, the challenge is clear: maintain strategic flexibility while building resilience. In finance, this means ensuring access to multiple payment systems and keep improving its domestic payment technology. In semiconductors, it means continuing to invest in cutting-edge capabilities that make Korean firms indispensable to both great powers and third-party countries. In basic manufacturing, it means diversifying markets and preparing for continued trade turbulence with the United States.
The geoeconomic competition between the United States and China is not a passing phase but a likely defining feature of the years ahead. Korea’s success will depend on how skillfully it navigates these treacherous waters.
Matteo Maggiori
Matteo Maggiori is the Moghadam Family professor of finance at the Stanford Graduate School of Business and a co-founder and director of the Global Capital Allocation Project. The views expressed here are the writer’s own. — Ed.