[Choi Junyoung's World+] Our Stance as We Face the APEC Super Week

Trump's Wall: Controlling People, Goods, and Capital
Large-Scale U.S. Investment and the Risk of Leaving Korea
Understanding and Responding to U.S. Changes: The Key to a New Era

The U.S.-China summit to be held in Busan is now just one day away. According to reports, through talks in Malaysia, high-level officials from both countries have reached an agreement: the United States will postpone the imposition of an additional 100% tariff, and China will also suspend its export controls on rare earth elements. While the final decision and approval of the two leaders are still required, it is at least fortunate that tomorrow's U.S.-China summit is unlikely to end in a breakdown without any resolution. For South Korea, which is currently engaged in negotiations with the United States regarding $350 billion in investments, an atmosphere of negotiation and agreement is far more advantageous than one of conflict and collapse.

It has been about nine months since President Donald Trump took office. The changes in President Trump's policies have been more radical than expected. The world has been shaken by President Trump's strategy of ignoring existing relationships and order and unilaterally pushing forward in almost every area. Of course, President Trump’s uncompromising negotiation tactics have played a decisive role in ending the Iran-Israel war and the Hamas (Palestinian militant group)-Israel conflict. While questions remain about the sustainability of the peace achieved through such forceful means, as well as the feasibility of the future vision promised by President Trump, it must be acknowledged that he played a significant role simply by ensuring that people no longer have to die in war.

President Trump has sought to resolve the U.S. fiscal deficit and create manufacturing jobs in the United States by sharply increasing tariffs, and to some extent, he has achieved results. In June alone, over $28 billion in tariffs were collected. U.S. government officials have expressed expectations that at least $500 billion, and up to $900 billion, in additional tax revenue could be secured. The anticipated inflation and economic slowdown resulting from the tariff hikes have not yet materialized. Massive investments in the field of artificial intelligence (AI), which President Trump is actively encouraging, have offset stagnation and contraction in other sectors.

There have also been a series of large-scale investment pledges aimed at circumventing tariffs. Taiwan’s TSMC has promised an additional $100 billion investment in Arizona, and many companies, including Hyundai Motor Company of South Korea, are planning or carrying out large-scale investments in the United States. President Trump can proudly claim that his assertion-that building walls would bring companies and jobs back to the United States-is being proven correct.

Since the collapse of the Soviet Union in 1991, the United States has worked to lower the world’s barriers. It believed that the free movement of people, goods, and capital would be to its advantage. The globalization we know today began with the will and judgment of the United States. The collapse and transformation of the socialist bloc allowed people to move freely, while tariff reductions and eliminations promoted international trade. The removal of restrictions on capital flows enabled capital to move quickly in pursuit of greater profits. The continued rise of the U.S. stock market, in which we participate, has been thanks to the steady inflow of foreign investment.

However, President Trump perceives that the United States has been exploited in this process. He believes that illegal immigrants, taking advantage of the free movement of people, have entered the United States in large numbers and taken jobs from Americans. In his view, imports entering the country duty-free have undermined American companies and manufacturing jobs. He is convinced that the persistent U.S. trade deficit is the result of unfair practices by countries that maintain competitiveness through currency manipulation. He also believes that countries with large trade surpluses with the United States use the money they earn to buy U.S. stocks, bonds, and real estate, thereby taking away dividends and interest that should go to Americans. In President Trump’s view, the United States is being exploited twice: once in trade, and again in finance.

President Trump’s “walls” are intended to change all of this. The U.S. effort to prevent illegal immigrants from entering through border walls suggests that the free movement of people will gradually become more difficult. The imposition of tariff barriers is making the movement of goods more difficult as well. The only thing left is capital. President Trump’s key advisers have frequently mentioned the possibility of imposing a fee on the remittance of investment returns by foreign investors in the United States as a means to address the U.S. fiscal deficit. There have even been discussions about deducting a portion of the promised interest when paying out on U.S. Treasury bonds held by central banks. It seems unlikely that the flow of capital, the last remaining freedom, will remain unrestricted. The global order we have taken for granted is rapidly disappearing under President Trump.

We must recognize that these changes pose a significant crisis for us. The U.S. market, with its strong consumer demand, guarantees a level of profitability that cannot be matched by other markets. For companies considering investment in the United States as a way to circumvent tariff barriers, the low prices of energy and land are attractive incentives.

Over the past three years, a 70% increase in industrial electricity rates has undermined the foundation of South Korea’s manufacturing competitiveness. We must be mindful of the possibility that large-scale heavy industries, which have supported South Korea-especially its regions-may rapidly leave the country for the United States. The $350 billion investment pledged for the United States could further accelerate this trend. Focusing solely on installment payments and exchange rate stabilization to reduce the investment burden risks overlooking greater threats.

It is dangerous to think that we simply need to endure for the remaining three years and three months of President Trump’s term. The changes being brought about by President Trump are not simply the result of personal whims and willpower. Rather, it is because the American perspective and perception of the world have changed. The sudden roughness and unilateralism of the United States may feel unfamiliar and off-putting, but in times like these, it is all the more important to understand why this is happening and what the United States wants, and to convince them that we can move forward together. Never forget that understanding the other party faster and more accurately than anyone else is the first rule for surviving in a chaotic era.

Choi Junyoung, Senior Expert Advisor, Yulchon LLC (Global Law & Policy)