[Global Focus] The Silent 'Tariff War' Intensifies: "Doubtful if Trump's Will Will Prevail"

Trump Launches Tariff Offensive Starting with Canada, Mexico, and China
Aims for Trade Balance Improvement, Negotiation Leverage, and Investment Attraction
"Disrupting Order and Inviting Isolation... Unnecessary Conflict," Critics Say

The world has been engulfed in chaos caused by a 'tariff war' without gunfire. This is because U.S. President Donald Trump has imposed tariffs on allies without exception, as he had previously announced. Moreover, uncertainty is increasing as President Trump has reversed some decisions. Experts warn that rather than gaining the intended spoils through the tariff war, President Trump may inflict serious damage on the U.S. economy.

No Exceptions for Allies... Threat of All-Out 'Tariff Bombardment'

On the 4th (local time), the Trump administration implemented new tariffs at rates of 25% on Mexico and Canada, and an additional 10% on China, totaling 20%, starting at 12:01 a.m. This marked the official start of the Trump-led global tariff war.

Subsequently, President Trump delayed tariffs for about a month on imports from Mexico and Canada that fall under the United States-Mexico-Canada Agreement (USMCA), but the tariff war is expected to expand further. President Trump reaffirmed that from the 12th, a 25% tariff will be imposed on steel and aluminum without exceptions or exemptions. Tariffs on automobiles, semiconductors, and pharmaceuticals are also scheduled to be announced within this month, and he has ordered investigations into how imports of copper and lumber affect national security, signaling an intention to impose tariffs on these items as well. Furthermore, starting from the 2nd of next month, tariffs will be imposed reciprocally, considering the trading partners' tariff rates and non-tariff barriers, and on the same day, tariff barriers will be established on agricultural products.

Before taking office, President Trump regarded the U.S. trade deficit as a serious problem. He emphasized imposing tariffs on imports to enhance the price competitiveness of domestic products and to create high-wage jobs in the U.S. through attracting foreign investment. There is also an underlying intention to cover the revenue shortfall caused by large-scale tax cuts or to fund sovereign wealth funds through tariff revenues. This is why President Trump is escalating the trade war.

However, contrary to President Trump's intention to revive the U.S. economy, concerns are mounting that tariff policies may instead cause economic recession and other side effects. The Wall Street Journal (WSJ) reported, "There was a time when this tariff policy was criticized as the 'most foolish action' in history, which angered President Trump," adding, "Even that expression might have been insufficient. Investors are closely monitoring the slowing U.S. economy and the uncertainty of tariff policies."

Trade Surplus Does Not Necessarily Lead to Economic Growth... "U.S. Companies and Consumers Will Suffer"

Experts point out that resolving the trade deficit through tariff wars does not necessarily have a positive impact on the economy. Phil Gramm, senior researcher at the American Enterprise Institute (AEI), a U.S. think tank, said, "Protectionists argue that trade deficits negatively affect the U.S. economy. But in fact, trade deficits do not hinder economic growth, nor do trade surpluses promote economic growth," adding, "Protectionism alone cannot change market trends."

He noted that over the past century, no meaningful statistical correlation has been found between the U.S. trade balance and economic growth rates. In fact, during the 29 years after World War II when the U.S. maintained a trade surplus, the per capita GDP growth rate averaged 2.1%, whereas from 1976 to 2004, when the U.S. recorded trade deficits, the rate was 2.2%, even higher than during the trade surplus period.

Gramm emphasized that U.S. economic growth depends more on deregulation, tax cuts, and fiscal deficit control than on the trade balance. He said, "To promote economic growth, the Trump administration should focus on extending the tax cuts implemented during its first term or on deregulation," adding, "The trade deficit is a non-issue. If President Trump obsesses over this problem, it will negatively impact the economy and only increase trade-related risks."

Some analysts suggest that as President Trump uses tariffs as a 'negotiation card,' trading partners may also exploit this politically, and ultimately, the economic burden will fall on U.S. consumers. For example, Canada, a major target of the trade war, is expected to continue retaliating against tariff attacks rather than unilaterally yielding to President Trump's demands. Ezra Levant, CEO of the Canadian conservative media outlet Rebel News, said, "When President Trump threatened Canada with tariffs, saying he would make Canada the 51st state of the U.S., a wave of support for Canadian Prime Minister Justin Trudeau began," adding, "The U.S. Republican Party probably never fully considered the effects of adding a left-leaning province (Canada) with a population larger than California."

Levant also explained that a major reason President Trump targets the trade deficit with Canada is due to Canadian crude oil imports, saying, "Some of the oil sands companies producing crude oil, which is Canada's largest export to the U.S., are already owned by U.S. companies. Even if they are Canadian companies, many are controlled by U.S. investors." He predicted, "If President Trump imposes tariffs, both U.S. and Canadian companies will suffer. Both the companies producing Canadian oil sands crude and the U.S. refineries processing it will be hit. The economic burden will fall on U.S. consumers."

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There are also forecasts that if the reciprocal tariffs President Trump announced to be imposed from the 2nd of next month are actually implemented, the global trade system will undergo drastic changes, potentially isolating the U.S. This is because World Trade Organization (WTO) member countries, excluding the U.S., can maintain a multilateral trade system to check the U.S. Daniel Zervas, a law professor at Vanderbilt University, said, "The WTO's core principles, such as most-favored-nation treatment and fixed tariff rates, have been important elements in maintaining global trade stability. But the U.S. saying it will abandon these means it is effectively withdrawing from the trade system it helped build," adding, "The important point is that the WTO can continue to operate centered on the remaining 165 member countries even if the U.S. leaves."

Professor Zervas said the Trump administration's tariff policies will weaken the U.S.'s influence as a global leader, warning, "If other countries continue retaliatory measures against the U.S., American companies will ultimately suffer." He added, "The U.S. must carefully consider the impact of changes in the trade environment caused by reciprocal tariffs. It must thoroughly compare the costs of abandoning the trade system it built with the benefits that new tariff policies might bring."

Jonathan Levin, a Bloomberg columnist, also criticized reciprocal tariffs, saying, "President Trump's introduction of reciprocal tariffs stems from a mistaken perception that systems like value-added tax (VAT) imposed by some countries constitute trade barriers," adding, "Despite the U.S. having its strongest asset in a 'strong and integrated North American economy,' it is causing unnecessary conflicts even with neighboring countries, wasting important assets."