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Stupidest trade war with no allies and no friends

Posted February. 03, 2025 09:10,   

Updated February. 03, 2025 09:10

한국어

The 'Trump tariff bomb' has finally gone off. U.S. President Donald Trump on Sunday signed an executive order that imposes universal tariffs of 25 percent on Canada and Mexico and an additional 10 percent on China, which will become effective Tuesday. Canada and Mexico immediately announced ‘retaliatory tariffs’ on U.S. goods, and China threatened to take the US to the World Trade Organization. The Wall Street Journal called it “the stupidest trade war in history” in an editorial.

The U.S. move is shocking because it involves tariffs against not only a strategic competitor, China, but also neighboring allies. The war is set to escalate, with the U.S. also threatening to impose tariffs on the European Union. South Korea, a key U.S. ally and friend in the security and economic spheres, is not immune. Already, the U.S. is pushing ahead with tariffs on Korean consumer electronics, semiconductors, and more.

Historically, trade wars have left no winners and only resulted in collective destruction. The Smoot-Hawley Tariff Act, enacted by the U.S. in 1930, exacerbated the Great Depression by causing countries to race to raise tariffs. World trade decreased by one third and the global economy shrank by 15 percent. The chicken tariff wars between the U.S. and Europe in the 1960s, the U.S.-Japan trade conflict in the 1980s, and the U.S.-China trade war in Trump's first term have all left deep scars on the global economy, including higher prices, disrupted supply chains, and lost jobs. The biggest victims have been consumers around the world.

South Korea, which is highly dependent on international trade for its economy, will be particularly hard hit. Immediately, the tariffs are expected to directly harm large Korean companies with North American production centers in Mexico. If the tariffs are extended to Korean products in the future, key exports such as semiconductors and automobiles, which are currently duty-free under the KORUS Free trade agreement, will be hit hard in the U.S. market. If the tariffs slow down China’s exports, it will lead to a decline in Korean intermediate goods exports to China. The Korea Institute for Foreign Economic Policy has predicted that in the worst case, Korean exports could fall by up to 44.8 billion U.S. dollars.

The impact of a trade war on South Korea's economy, which is already sluggish, could be devastating. The government, the National Assembly, and businesses must join forces to respond thoroughly, including persuading the U.S. and mobilizing international cooperation. This is not the time for South Korea to be mired in political conflicts and bickering. A giant typhoon is coming that could swallow Korea in its entirety.