Trump’s Second-Term Tariffs: From Shock to Trade Order Restructuring [De-Globalization? New Order!] ④

How Will Trump-Style Tariffs Unfold?
An Entrenched Structure Tied to Fiscal Policy, Manufacturing, and Security
U.S. and China: Not a Winner-Takes-All Game, but Prolonged Power Sharing
South Korea Must Respond by Restoring Multilateralism

The first administration of Donald Trump in the United States shook the multilateral order by implementing a tariff shock therapy directly targeting China. The second administration is taking things a step further. By establishing a detailed grid based on country, product, and production process, it fully embraces the principle of "reciprocity," effectively designing a bloc-based trade order. The discourse on "securitization of economic issues and weaponization of interdependence," which spread during the Joe Biden administration, has helped share this sense of concern globally, providing a foundation for the Trump administration's second-term tariff regime to become not just a one-off pressure tactic but a "new norm."

During Trump’s first term, there were clashes with allies over certain items such as steel and aluminum, but the main target was China. In his second term, however, the policy spectrum has broadened to include trade deficits, mutual trade practices between countries, and detailed designs by product and industry. Tariffs have become more than just a trade tool; they are now intertwined with fiscal revenue, manufacturing revival, and security logic, creating a structure that is difficult to reverse even if the administration changes.

The Entrenchment of Tariffs Is Unavoidable

This year, the Trump administration has set basic tariffs on almost all trading partners and imposed additional tariffs on 57 countries with large trade deficits with the United States. This is not simply a "rate hike," but a reciprocity-based tariff model that differentiates according to the size of each country’s trade surplus or deficit with the U.S. This measure essentially overturns the Most-Favored-Nation (MFN) principle, which was a core tenet of the free trade order.

The "World Trade Review," recently published by the University of Cambridge in the United Kingdom, analyzed that "reciprocal tariffs could dismantle the multilateral system, but at the same time, could become institutionalized as the rules of a new trade order." If the Trump-style reciprocity becomes the "new normal" amid the collapse of the existing World Trade Organization (WTO) system, global trade will face dual pressures of protectionism and institutional restructuring.

Tariffs in Trump’s second term are closely linked to political and fiscal structures. If tariff revenue is used as a fiscal resource and then funneled into tax cuts or cash rebates, it creates a "lock-in" effect. Once tariff revenue is incorporated as a fixed resource, reducing it would inevitably require other tax increases, making it difficult to roll back. Combined with the domestic political slogan of "manufacturing revival," this is why many expect it will not be easy to reverse even if the Democratic Party takes power.

A report by the Federal Reserve Bank of Dallas also found that the reciprocal tariff model can maximize fiscal revenue as long as there is no retaliation. However, if retaliation occurs, the optimal level drops to around 30%. Currently, an ideologically driven frame of "not yielding even to retaliation" has taken root in the U.S., creating a structure where political sustainability takes precedence over economic efficiency.

U.S.-China Conflict: Long-Term Coexistence, Not Total Victory or Defeat

The U.S.-China relationship is not a zero-sum game of absolute victory or defeat. The United States has succeeded in slowing China’s progress in semiconductors and batteries, but China is responding by fundamentally transforming its manufacturing model. By combining artificial intelligence (AI) and robotics with labor-intensive industries, China is overturning its cost structure, while in new industries, it is simultaneously dominating both the market and industrial ecosystem. In sectors such as solar power, electric vehicles, and drones, China has already secured the position of the world’s largest market and producer.

Experts believe that U.S.-China negotiations are likely to remain in a stalemate, with repeated declarations of political victory without substantive structural change. Ji Mansoo, a research fellow at the Korea Institute of Finance, stated, "China has become a country that possesses everything from labor-intensive industries to advanced scientific and technological innovation capabilities through long-term industrialization and economic growth. Especially in new industries, China is creating new markets and dominating global supply chains, as seen in sectors like solar power, wind power, drones, electric vehicles, and batteries. This is leading to the concurrent growth of markets and industries."

He emphasized, "The areas where the United States must maintain its lead are financial competitiveness, the dollar system, scientific and technological innovation, the stability provided by its higher education system, and overwhelming military power," adding, "Ultimately, the U.S. and China will enter an era of sharing leadership while pursuing two different paths."

Korea’s Response: Restoring Multilateralism and Industrial Transition

Other countries’ responses are largely divided into two approaches. The European Union, Japan, and South Korea have chosen to adapt to U.S. tariff policies and minimize damage through negotiations. In contrast, Brazil and India have formed a clear axis of opposition. Canada and Mexico, the United States’ largest trading partners, are bound by the United States-Mexico-Canada Agreement (USMCA), but their decisions remain inconsistent due to the interests of U.S. companies operating in their countries.

South Korea, with its high export dependence and deep ties to both the U.S. and China, is inevitably vulnerable to shocks. Experts suggest that restoring the functions of the WTO, strengthening multilateral frameworks such as the Asia-Pacific Economic Cooperation (APEC), Regional Comprehensive Economic Partnership (RCEP), and Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), transitioning materials, components, and equipment (so-called "Sobu-jang") to future-oriented forms, and adopting a Europe-centered diplomatic and security strategy are key solutions.

The problem lies in domestic policy capabilities. The current "fund and guarantee-centered financialized industrial policy" is insufficient to respond to global tariff shocks. A comprehensive approach mobilizing both the public and private sectors to resolve specific bottlenecks is urgently needed. National tasks such as carbon neutrality, new industries, and supply chain stability cannot be addressed solely through fund creation or tax incentives.

Research fellow Ji stated, "We cannot return to the 1960s-style industrial policy of fostering all industries as we know them," adding, "It is necessary to identify bottlenecks or socially essential tasks that must be addressed and have the government and companies work together to solve them technologically. For massive challenges like the low-carbon transition, we should not simply push forward with funds or tax incentives, but instead, work together to find practical technological solutions."