[Insight & Opinion] Predictable Trump and Our Responsibilities

President Trump announced a 25% tariff on steel and aluminum, effective from the 12th of next month. South Korea is also included among the countries subject to the tariffs. But is this really a shocking development?

The imposition of tariffs on steel was also done during Trump’s first term. There are hardly any actions by Trump that come without prior notice. This is why the market reaction has not been significant. In fact, although Trump may seem rough, he is a person with few sudden surprises and is predictable. He is not someone who would suddenly declare martial law. Compared to his more radical campaign promises, he is now relatively flexible. The tariff increase on China was implemented, but it was 10%, not the 60% he had announced before taking office. The plan to impose a 25% tariff on Canada and Mexico was also delayed by 30 days.

The United States is currently undergoing a comprehensive overhaul of its trade policy. Immediately after taking office, President Trump signed an executive order to investigate ‘unfair trade practices’ and ‘inappropriate currency policies’ of major trading partners. In particular, he ordered an evaluation of China’s compliance with the trade agreement that took effect in 2020. China had promised to increase imports from the U.S. by $200 billion. The report deadline is April 1.

Trump had already announced tariffs on steel, as well as semiconductors, petroleum, pharmaceuticals, and automobiles during his candidacy. While tariffs are likely to be imposed as announced, the pace is being adjusted over time to observe reactions first.

In fact, even for Trump, it is important to minimize the negative economic effects of tariff increases. Most studies on the effects of tariff policies during Trump’s first term were negative. There was almost no industrial protection effect, and prices rose. There is no reason for this to be different this time. The midterm elections are two years away. It would be problematic if price increases caused by tariffs lead to economic downturns. Using tariffs as leverage to get what he wants in advance is the best strategy. Harsh rhetoric is just packaging for deals and negotiations.

The plan to impose reciprocal tariffs at the same rate as tariffs imposed on U.S. exports did not specify an effective date. This is likely a call to hurry up with responses before the U.S. imposes tariffs. The fact that Trump and Xi Jinping, who had spoken before taking office, are delaying calls suggests that the terms of the deal are not yet satisfactory.

Pragmatism in Trump’s second term has become more pronounced. In the case of TikTok, while a ban was pursued during the first term, now the demand is to transfer 50% ownership to a U.S. company. For China, it is better than TikTok shutting down completely. Looking back, even during the first term, the damage to South Korea’s exports from Trump administration policies was not significant. Of course, there is no guarantee it will be the same this time.

Recently, South Korea’s trade surplus with the U.S. reached an all-time high, and semiconductors remain a major export item to the U.S. Last year, South Korean automobile sales in the U.S. also hit a record high. Strong pressure is expected. However, Trump is a negotiable counterpart. It is not entirely bad for our economy. Cooperation is likely to strengthen in areas such as energy and power equipment, shipbuilding, and artificial intelligence.

The most important factor may be the potential spillover benefits from U.S. sanctions against China. If U.S. tariffs on batteries imported from China are more than 15 percentage points higher than those on South Korea, Korea could replace China in the U.S. market. During Trump’s first term, China was hampered by U.S. sanctions, which gave our semiconductors and electric vehicles some breathing room. Of course, even if time is gained, it is up to us to use that time well.

Sangcheol Kim, Economic Commentator