[US Election D-50 Trade Check] Business World Seeks 'Second Trade Expansion Act'... Tariff Response as Survival Strategy

Regardless of who is elected, there is ample room for imposing high tariffs
Utilization of Trade Expansion Act Section 232 and others possible
Maintenance of protectionist stance is a common denominator
Degree of tariff policy may vary
"Attention should also be paid to whether campaign promises are cross-implemented"

With the U.S. presidential election just over 50 days away, the biggest concern for our companies is the tariff policy of the new administration that will take office next year. Although the degree may vary, there is ample possibility that either the Democratic or Republican government will impose tariffs, leveraging the fact that the U.S. is the world's largest market. In particular, the business community does not rule out the possibility that provisions like Section 232 of the Trade Expansion Act, which former President Donald Trump invoked during his tenure, could be brought back into play despite being somewhat obsolete.

According to the business sector on the 13th, companies and trade scholars are busy analyzing to find a second ‘Section 232 of the Trade Expansion Act’ card. This provision, which includes safeguard measures, was revived under the Trump administration and dealt a blow to steel exports.

The legal provisions currently considered candidates by companies and academia include Section 122 of the Trade Act, which grants the president the authority to impose tariffs when the balance of payments deficit is severe, and Section 338 of the Tariff Act, which allows for countermeasures against countries discriminating against the U.S. The International Emergency Economic Powers Act, targeting adversarial countries, is also considered a potential card the next U.S. administration might use depending on circumstances.

The tariff card is drawing attention because South Korea’s exports to the U.S. are increasing. From January to May, South Korea’s exports to the U.S. amounted to $53.3 billion, surpassing exports to China, which stood at $52.69 billion. According to the Ministry of Trade, Industry and Energy, if this trend continues, it is highly likely that South Korea’s largest trading partner will shift from China to the U.S. for the first time in 21 years. This means tariffs could be used as a weapon to pressure Korean companies to resolve trade imbalances.

The U.S. has already demonstrated its tariff influence through the ‘Super 301’ provision. Super 301 originated when the U.S. Trade Act Section 301, enacted in 1974, was amended in 1988 with additional clauses, adding the prefix ‘Super.’ This provision allows the U.S. president to impose trade retaliation measures if unfair or discriminatory acts by a trading partner cause significant damage to domestic industries.

President Joe Biden recently requested the U.S. Trade Representative (USTR) to review whether retaliatory tariffs could be imposed on Chinese steel and aluminum products under Super 301, and upon approval, immediately implemented them. Tariffs on electric vehicles, batteries, and solar products were also increased by 100%. The need for regulations on Chinese connected vehicles is also under review.

Experts believe that South Korea is at risk of being classified as a target for retaliatory tariffs whenever the U.S. determines it is running a trade deficit. This means Korean companies will not always be exempt.

At this point, there is generally no disagreement with the forecast that whichever party?Democratic or Republican?takes power, strong protectionist trade policies will be implemented to protect domestic industries, with only differences in degree. The Wall Street Journal (WSJ) recently highlighted the trade and tariff policies of the two presidential candidates, former President Trump and Vice President Kamala Harris, noting that "former President Trump has stated he would impose tariffs of at least 60% on China and 10-20% on other countries worldwide." It added that Vice President Harris "would generally follow President Biden’s trade policies," noting that "Biden has maintained Trump’s tariffs on China while increasing some tariffs on electric vehicles."

Lee Si-wook, president of the Korea Institute for International Economic Policy, emphasized at a recent briefing in Washington D.C. that both candidates might partially adopt each other’s tariff policies if elected, and that this should be noted. Lee predicted, "If former President Trump applies trade pressure through tariff policies and moves toward controlling not only exports but also investments in strategic technologies, similar to Vice President Harris, it will be even more challenging." Regarding Vice President Harris, he said, "How much she will utilize tariffs if elected will be an issue."