2019 has seen big declines in the volatile stock market, with tensions rising globally on the back of the trade war.

While the world is focused on the ongoing trade tensions between the United States and China, a separate feud could prove even more difficult to resolve.

Japan and South Korea have been locked in an escalating trade dispute — and if you own a smartphone, it could affect you.

While the two countries’ trade battle only escalated in the last few months, it’s based on tensions that date back for more than a century.

GROWING TRADE FEUD BETWEEN SEOUL AND TOKYO

Last month, Japan formally removed South Korea from a “white list” of countries to which it extends preferential trade status.

Japan is the main producer of three chemicals that are key to South Korea’s electronics manufacturing industry — fluorinated polyamides, photoresists and hydrogen fluoride.

Exports of these chemicals to South Korea were tightened in August, prompting a backlash from Seoul.

Japan produces around 90 per cent of the world’s fluorinated polyamides and photoresists and about 70 per cent of hydrogen fluoride, making it difficult for major Korean smartphone makers such as Samsung, SK Hynix and LG to find alternatives.

Last week, Seoul in response filed a complaint with the World Trade Organisation over a Japanese decision to remove its preferential trade status.

Now, in a tit-for-tat measure not unlike the escalation of the US-China trade feud, South Korea is moving to remove Japan from its own listed of trusted trading partners.

Seoul’s trade ministry has completed nearly all procedures for the removal of Japan from its list of nations given favoured export procedures for “operating an export control system that violates international norms”, according to the Ministry of Trade, Industry and Energy.

It marks the lowest point in the two countries’ trade relations in decades. If tensions prove impossible to resolve, they could have serious implications for the global economy, given their trade relationship now holds around $124 billion a year.

In South Korea, this is having a tangible effect. Japanese beer is going unsold, shoppers are avoiding Uniqlo, and a recently released Japanese children’s movie, Butt Detective, bombed in South Korea, according to a recent New York Times report.

Some South Korean consumers are also starting boycotts and setting up websites suggesting local alternatives to Japanese products.

This fight didn’t come from nowhere. Tensions between Japan and South Korea have been brewing since World War II.

At the time, Koreans — already violently colonised by Japan in the early 1900s — were conscripted to work in factories and mines that supported Japan’s war machine, and others were forced to work in military brothels.

The question of compensation has created a rift between the two countries ever since. Tokyo argues it has compensated under a 1965 bilateral treaty and a fund set up in 2015. Seoul argues it hasn’t been compensated enough.

Today, there remains an ongoing underlying struggle to make peace with the past.

‘RISING SUN’ FLAG ADDS FUEL TO FIRE

Tensions were already on the rise between the two countries this week after Seoul asked the International Olympic Committee to ban Japan’s “Rising Sun” flag — which it compared to a Nazi swastika — from next year’s Tokyo Olympics.

South Korea’s Ministry of Culture, Sports and Tourism on Wednesday sent a letter to IOC President Thomas Bach expressing “deep disappointment and concern” over Japanese plans to allow the flag in stadiums and other facilities during the 2020 Olympics.

South Korean Olympic officials last month urged the local organising committee to ban the flag, but Tokyo organisers responded by saying it was widely used in Japan, was not considered a political statement and “it is not viewed as a prohibited item”.

The flag, portraying a red sun with 16 rays extending outward, is resented by many South Koreans, who still harbour animosity over Japan’s 1910-1945 colonial rule of the Korean Peninsula.

In its letter to Mr Bach, the South Korean ministry described the flag as an unmistakeable political symbol that’s embraced by Japanese right-wing protesters who vent anger towards Koreans and other foreigners. It said the flag recalled “historic scars and pain” for the people of South Korea, China and other Asian countries that experienced Japan’s wartime military aggression, similar to how the “(swastika) reminds Europeans of the nightmare of World War II”.

The ministry said it also pointed out FIFA, the governing body of world soccer, had banned the flag in international matches.

“Furthermore, we emphasised that the use of the rising sun flag during the Tokyo Olympics would be a direct violation of the Olympic spirit promoting world peace and love for humanity, and that the IOC should have the Tokyo organising committee withdraw its (current) stance on the flag and prepare strict measures to prevent it from being brought to stadiums,” the ministry said.

Tokyo’s Olympic organising committee didn’t immediately react to South Korea’s request to the IOC to ban the flag at the Games.

The IOC confirmed it received the Korean request and said “sports stadiums should be free of any political demonstration”. “When concerns arise at Games time we look at them on a case-by-case basis,” the Olympic body said in a statement.

FEARS THE DISPUTE COULD GO GLOBAL

Rory Green, an economist specialising in Far East Asia, warned the dispute threatened to disrupt global supply chains of electronics as well as the US-led security apparatus in the region.

He said if the tit-for-tat exchange was to escalate like we’ve seen between Donald Trump and Xi Jinping, major global firms from Apple to Amazon could be affected, which would cause major increases in the price of goods.

“Should nationalist Trump economics and trade friction escalate, firms from Apple to Amazon will face massive supply disruption,” he wrote. “A full ban on semiconductor component exports could conceivably cause prices to rise by 5 per cent. Devices from tablets and phones to laptops and routers would be affected.”

This, however, is a worst-case and unlikely outcome: “As it stands, the export controls remain purely administrative. Tokyo maintains that exports will be approved if stringent application procedures are met. Samsung and SK Hynix, South Korea’s billion-dollar behemoths, are well able to comply with reasonable requirements. Moreover, Korean chip producers have on average one to two months’ inventory on which to fall back.”

Rolando Hernandez, vice-president of mobile solutions provider Valid, said the dispute could give Apple an edge over Korean brand Samsung.

But he also noted Apple was a client of Samsung; Japan’s chemical export restriction could therefore harm the American giant.

“Samsung and LG, both in South Korea, are the leaders and main suppliers for Apple of OLED displays and iPhones, as well as DRAM and NAND flash memory chips,” he told Forbes.