[The Editors' Verdict] What Trump Values More Than Tariffs

What will be the top priority for allies and the economic sector if the second term of the Donald Trump administration begins? Through his campaign promises, President-elect Trump has presented six major tasks: improving the trade deficit, establishing domestic supply chains in the U.S., easing regulations on renewable energy, renegotiating free trade agreements (FTAs), strengthening decoupling from China, and internationalizing U.S. domestic laws.

Among these, the immediate concern domestically is the massive trade surplus with the U.S. Considering his actions and statements emphasizing trade balance and America First policies, there is strong concern that he will raise tariff barriers even against allies, armed with a thorough business mindset. His pledge to impose tariffs on all imports is a clear example. Last year, South Korea recorded a $44.5 billion surplus in trade with the U.S. This surplus more than doubled compared to the first Trump administration. There is a high possibility of increased trade pressure. This is why there are calls to increase imports of U.S. agricultural products and energy.

This atmosphere recently took a turn when President-elect Trump unexpectedly mentioned Korea’s shipbuilding industry. In a recent phone call with President Yoon Suk-yeol, he said, "I am aware of Korea’s world-class warship construction capabilities," and praised the domestic shipbuilding industry by adding, "Cooperation between the two countries is needed not only in ship exports but also in the MRO (maintenance, repair, and operations) sector." This supports the view that securing a domestic-centered supply chain will be prioritized over imposing tariffs.

President-elect Trump’s direct mention of Korea’s shipbuilding industry is closely related to the environment the U.S. faces. The U.S. virtually lacks a shipbuilding ecosystem. According to the United Nations Conference on Trade and Development (UNCTAD), the U.S. accounted for only 0.1% of the total tonnage of ships built worldwide last year, ranking 14th. China ranked first with 32.86 million GT (gross tonnage), making up 51%, followed by Korea with 18.31 million GT at 28%. Japan built 9.96 million GT, holding a 15% share. The top three are the three Northeast Asian countries. Among them, Korea not only produces high value-added vessels such as liquefied natural gas (LNG) carriers but also recently acquired a U.S. shipyard in the Philippines and has begun directly repairing U.S. warships. This indicates a high level of technological competitiveness. Especially considering the intensifying U.S. containment of China, Korea’s shipbuilding industry, the largest among U.S. allies, cannot be ignored. To resolve bottlenecks in domestic warship repairs, allied shipbuilding industries must inevitably be included in the supply chain.

Experience from Trump’s first term also contributed to raising awareness of the importance of supply chains. When COVID-19 broke out and masks were unavailable, the U.S. reached out to China, with whom it was engaged in a trade war, in a “humiliating” precedent. It suffered embarrassment over something as simple as masks, not even advanced products. To avoid repeating such experiences, the lesson learned was that essential items must be secured through domestic supply chains. Robert Lighthizer, former U.S. Trade Representative and a candidate for the next U.S. Treasury Secretary, asserted in his book No Trade Is Free that "the most important thing is to strategically decouple from China." Regarding tariffs, which he frequently used, he said, "No immediate decisions have been made." This implies that building new supply chains excluding China is the top priority.

Incorporation into a U.S.-centered supply chain is also an important task for us. At the same time, the defense industry is attracting U.S. interest. Appealing our industries to the next U.S. administration will likely be the best way to deal with “businessman” Trump, rather than worrying about tariffs.