The Donald Trump administration is poised to go ahead with a massive tariff bomb that will further intensify trade war between the world’s No. 1 and No. 2 economies. U.S. media reported that President Trump will announce as early as Monday (local time) a measure that will impose an extra 10 percent tariff on products worth 200 billion U.S. dollars, or about 40 percent of China’s total export (about 500 billion dollars) to the U.S. Bilateral high-level trade talks involving U.S. Treasury Secretary Steven Mnuchin and his Chinese counterpart, Vice-Prime Minister for Economy Liu He, are scheduled on September 27 and 28, but President Trump has decided to impose heavy tariffs irrespective of the talks and have effectively publicized ahead of U.S. mid-term elections in November.
The United States and China already took reciprocal measures to impose high tariffs of 25 percent on imports worth a total of 50 billion dollars (34 billion dollars and 16 billion dollars, respectively, on two occasions) in July this year. If the United States levies additional tariffs on imports worth 200 billion dollars, half of China’s exports to the United States will be subject to high tariffs. Moreover, President Trump publicly said on Sept. 7 that “I hate to do this, but behind that there is another $267 billion ready to go on short notice if I want.” If this statement translates into action, China’s entire export to the United States will come to face hefty tariffs. While Beijing proposed talks, it has also said it will counter Washington’s measures.
The problem is the Korean economy. If Korea’s No. 1 and No. 2 importers engage in a full-blown trade war, this country will inevitably suffer collateral damage. As experts say that Korea’s flagship manufacturing industries including semiconductors, petrochemical products, steel and automobiles are facing a significant crisis, not only Korean conglomerates that are at the frontline of export in these fields but also small- and medium-sized companies will be dealt with a heavy blow.
It is worrisome how severe damage this looming tsunami of trade war poised to hit the Korean manufacturing sector will cause to the Korean economy. The government adjusted this year’s economic growth target from a 3-percent level projected early this year to 2.9 percent, and next year’s to 2.8 percent, which demonstrates the dire condition facing the national economy. Even so, the government’s policies hardly show any sense of crisis, making it difficult to believe Korea is a nation that is heavily depending on export for survival and growth. Korea is not paying attention to industrial policy for the manufacturing sector and export as much as the United States and Japan, let alone China, which is a socialist country. If the government has no intention to revise the direction of its economic policy focused on "income-driven growth," it at least should agonize how it will revive its struggling manufacturing sector amid China’s rise and the intensifying trade war between Washington and Beijing.