[US Election D-50 Trade Check] 60% Increase in Trade Surplus with US... Only Grounds for US Pressure Grow Stronger

Trump, During Past Term Steel Tariffs and FTA Revision Negotiations
Various Domestic Laws Allow Imposition of Tariffs

Former President Donald Trump instructed the Department of Commerce in April 2017, less than 100 days after his inauguration, to investigate the impact of steel imports on U.S. national security. The basis was Section 232 of the Trade Expansion Act enacted in 1962. The U.S. had long regulated steel trade using tariffs or quotas to protect its domestic steel industry. What was different at that time was citing national security as the reason.

The last time this law was invoked before then was in 2001 (iron ore and semi-finished steel products), and the actual investigation and recognition of damage occurred in 1999 (crude oil and products), so it was the first time in about 20 years that this rarely used card was played. The U.S., which had advocated free trade in the 20th century, showed a completely opposite stance, disregarding World Trade Organization (WTO) complaints, intensifying the trend of ‘every country for itself’ on the international trade stage.

U.S. Democratic presidential candidate Vice President Kamala Harris (above) and Republican candidate former President Donald Trump [Photo by Yonhap News, Reuters]

Pressuring Foreign Trade Through Domestic Law

In recent years, as protectionism has strengthened, it has become common for the U.S. to influence trade order through domestic laws. Not only the Trade Expansion Act Section 232 invoked by former President Trump, but also current President Joe Biden raised tariffs on China in May based on Section 301 of the Trade Act. Since protecting domestic industries and economic security have been key themes during election periods, there is a possibility of additional measures based on domestic laws.

Section 122 of the Trade Act is a representative example. Enacted in 1974, this law allows the president to impose tariffs at a certain level in cases of large trade deficits or severe currency depreciation. Yoo Jiyoon, a researcher at the Korea Institute for International Economic Policy, recently stated in a report, "New tariff policies are being discussed in the U.S.," and emphasized, "It is necessary to prepare for the possibility that the U.S. administration will implement tariff policies using new domestic legal grounds."

This is related to the chronic U.S. trade deficit situation. Under the Trump and Biden administrations, which emphasized protectionism, the U.S. trade deficit has continued to grow. The trade deficit, which was about $735.5 billion in 2016, steadily increased to $1.1835 trillion in 2022, a roughly 60% rise in six years. This year, the deficit is expected to reach a record high as imports continue to grow faster than exports.

Additionally, there are legal grounds to respond to actions by trading partners that may adversely affect U.S. commerce (Tariff Act Section 338) or to apply higher tariff rates to non-market economy countries compared to normal trading partners (Trade Act Section 402).

The target is China. The U.S. views China’s advanced industries such as electric vehicles and semiconductors as having grown through illegal subsidies at the government level. Since former President Trump, who openly mentioned trade retaliation, and Democratic Vice President Kamala Harris, who maintained a similar stance, have both taken this approach, experts expect tariff measures targeting China to continue steadily.

President Joe Biden of the United States
[Photo by Yonhap News, Xinhua News Agency]

Revising FTAs and Imposing Tariffs... What Happened in the Past?

Former President Trump demanded revising the Korea-U.S. Free Trade Agreement (FTA) early in his term. The stated reason was simple: he believed the growing trade deficit with Korea was due to flawed negotiations. Since he was elected under the slogan of making America great again, he saw the need to resolve the trade deficit.

At that time, the Korean and U.S. governments negotiated for about a year starting in 2017 and eventually revised some provisions. The tariff on cargo trucks (pickup trucks) was delayed from 2021 to 2041 for elimination, and the threshold for recognizing U.S. safety standards for American cars exported to Korea was raised from 25,000 to 50,000 units. Environmental standards were also more than doubled. While steel tariffs under Section 232 were exempted, a quota was set to reduce the volume of exports to the U.S. below a certain level. After the revision, it was evaluated that the U.S. conceded on automobiles but maintained steel protections.

The trend of prioritizing domestic interests has also strengthened under the Democratic Party. Since President Joe Biden took office, he has actively promoted reshoring policies and invested heavily in sectors such as semiconductors, electric vehicles, batteries, and solar energy to attract foreign capital and technology. His efforts were so vigorous early on that some said he was "more aggressive than Trump." The pandemic underscored the importance of securing stable supply chains in key sectors.

Korean companies responded with active investment in the U.S. According to Korea Eximbank statistics, the share of U.S. investment among Korean companies’ overseas investments rose from 36.3% in 2021, Biden’s first year, to 43.7% last year, the highest since 1988. This is a sector where the U.S. is actively pressuring allied companies to advance in order to gain an upper hand in the rivalry with China.

The U.S. also offered incentives such as those under the Inflation Reduction Act (IRA) and the CHIPS Act, pouring massive subsidies. Leading Korean companies including Samsung Electronics and SK Hynix (semiconductors), Hyundai Motor Group (automobiles), and LG Energy Solution (secondary batteries) have been building or starting operations at local factories in the U.S. one after another.