Others pointed to potential disruptions to the technology supply chain.
In a note from May, Capital Economics noted that South Korea was the biggest producer of liquid crystal displays globally, with a 40 percent market share, and the fourth biggest producer by value added of electronics products.
“If South Korean production was badly damaged by a war there would be shortages across the world. The disruption would last for some time — it takes around two years to build a semi-conductor factory from scratch,” economists Gareth Leather and Krystal Tan said in the Capital Economics note.
“Given South Korea’s key role as a producer of intermediates, especially in the electronics sector, there would not be enough spare capacity elsewhere in the global economy to compensate for the lost production. Many companies outside of South Korea would be forced to halt production,” they added.
Indeed, because many of South Korea’s exports are at the beginning of the global supply chain, some economists use the country’s trade data as a barometer for the outlook for global trade ahead.
While a potential conflict with North Korea could severely hurt South Korea’s trade, a trade spat with the U.S. may not, analysts said.
At the same time that Trump is railing against the North’s behavior, he’s also beating a drum on concerns about the U.S. free trade agreement with South Korea, known as Korus.
Trump during an April interview with the Washington Post called Korus a “horrible deal” that has “destroyed” his country, and he threatened to terminate it. A report in The Wall Street Journal on Saturday said the Trump administration could serve notice of withdrawal from the pact as early as this week.
Analysts at Citi said in a note on Monday that Trump may use a Korus withdrawal to appeal to his domestic political base. That would be in line with Trump’s presidential campaign, which took a protectionist tone.
But Citi said that withdrawing from Korus might not significantly impact South Korea’s exports to the U.S.
It pointed to a study by the Korea Institute for Industrial Economics and Trade, which argued that the effective tariffs on South Korean manufactured goods might have been even lower without Korus.
Citi added, however, that withdrawing from Korus “should be seen as strategically risky if it erodes U.S.-South Korea alliance and U.S. overall influence in East Asia at a time when China is trying to expand its own.”
—CNBC’s Javier David contributed to this article.