[Interview] "'North America Economic Disruption' Trump More Aggressive on Tariffs with Allies than China... South Korea with Large Trade Surplus Also Targeted"

Outlook on the 'Trump-Led Tariff War'
Urgent Interviews with Two U.S. Economic and Trade Experts
William A. Reinsch, Chair for International Economics at CSIS
Michael J. Smart, Managing Director at Rock Creek Advisors
Massive Layoffs in Canada and Mexico... U.S. Production Paralyzed
"Even Trump Will Be Surprised by the Destructive Consequences"

"Trump has destroyed the unified North American economic community and overturned the rules-based trade system. Although he claimed it was a measure for America, even Trump himself will be surprised by the destructive consequences."

U.S. President Donald Trump has targeted Canada, Mexico (each with 25%) and China (10%) as the first tariff targets after his re-election. U.S. economic and trade experts pointed out that the second Trump administration is indiscriminately dropping 'tariff bombs' on both allies and adversaries, plunging the global trade environment and economy into unpredictable turmoil. There are also observations that South Korea, which has a large trade deficit with the U.S., will find it difficult to escape the range of Trump’s second-term tariff bombs.

On the 2nd (local time), William A. Reinsch, International Economic Chair at the U.S. think tank Center for Strategic and International Studies (CSIS), a global economic and trade expert, said in an interview with Asia Economy, "This tariff measure will cause massive layoffs in Canada and Mexico and halt the inflow of parts into the U.S., leading to production paralysis." Reinsch served as Deputy Secretary of Commerce during the Bill Clinton administration.

He predicted, "The direct impact of the U.S. tariff measures will be tremendously destructive," adding, "Considering possible retaliatory measures from other countries in the future, the costs will be even greater."

Michael J. Smart, Managing Director of U.S. investment advisory firm Rock Creek Advisors, said, "Canada and Mexico’s export dependence on the U.S. is 80%, and with the imposition of 25% tariffs, their gross domestic product (GDP) will decrease by more than 2 percentage points," forecasting that the economies of the two countries will effectively be paralyzed and the North American economic community will collapse. Smart is an international trade expert who served as a Democratic trade and commerce advisor to the U.S. Senate Finance Committee and previously handled international trade and investment affairs at the White House National Security Council (NSC).

They also saw inevitable negative effects on the U.S. economy due to the tariff war triggered by Trump. Agriculture was commonly cited as the industry expected to suffer the most damage. Concerns were also raised about a sharp rise in inflation due to increased import prices.

Smart said, "Prices of agricultural products such as fruits and vegetables, energy like gasoline, and automobiles will rise in the U.S." Reinsch also expressed concern about rising prices, introducing an analysis from Wolfe Research that automobile prices could increase by $3,000.

There was also analysis suggesting that the 25% tariffs on Canada and Mexico and the 10% tariffs on China should be viewed differently. It was interpreted as Trump sending a signal of willingness to negotiate to Chinese President Xi Jinping.

Reinsch said, "Trump is interested in negotiating with Xi Jinping and probably thought that imposing a 60% tariff would eliminate the possibility of negotiation," adding, "If China does not negotiate or future negotiations fail, Trump will raise tariffs on China." Smart also analyzed, "Following the delay in implementing the TikTok ban, the relatively moderate 10% tariff is a signal of willingness to restore relations with Xi Jinping." He noted that the average U.S. tariff rate on China is already high at 20%, and China’s export dependence on the U.S. is only 15%, so this measure is unlikely to cause serious damage to China.

Above all, experts pointed out that Trump’s second-term tariff war does not discriminate between allies and friends. Smart said, "Trump appears more aggressive in imposing tariffs on allies who share democratic values such as Canada, Mexico, and the European Union (EU) than on China," adding, "Whether a country is a friend or an enemy of the U.S., anyone can be a target, and no country is safe."

Attention was also drawn to the expanding role of tariffs in this process. This is because President Trump is using tariffs diversely as negotiation leverage, a means to reduce trade deficits, restore manufacturing, expand revenue bases, and address illegal immigration and drug problems. Reinsch said, "The main motivation for raising tariffs is probably the need for more revenue due to tax cuts," adding, "It is also a means to achieve various goals such as reducing trade deficits and rebuilding the economy (including manufacturing)."

There was also a forecast that South Korea could be the next target of President Trump. South Korea achieved a trade surplus with the U.S. of about $55.7 billion last year, the largest ever. Smart predicted, "While the EU is a likely next target, countries with large trade surpluses with the U.S. such as South Korea, Japan, Taiwan, and Vietnam are also targets of Trump." He advised that South Korea and others should expand their trade bases with countries other than the U.S. to reduce dependence on the U.S.

Reinsch predicted, "The next tariff moves could target specific industries such as steel, copper, pharmaceuticals, and semiconductors, as Trump announced on the 31st of last month," adding, "Probably all countries will face tariffs."

Warnings were repeatedly raised that Trump’s tariff measures could trigger a domino effect of retaliatory tariffs, disrupting the global trade environment and causing major aftershocks in the world economy and political landscape.

Reinsch warned, "Trump broke the most important trade agreements the U.S. had negotiated and overturned the rules-based trade system, returning us to the law of the jungle," adding, "Trump said it was a measure for America, but even he will be surprised by the results." Smart expressed concern, saying, "He is abandoning shared values that unite allies and applying economically indiscriminate force, which will weaken the alliances that have provided the U.S. with a comparative advantage for a long time."