How Will South Korea Navigate Trump's Trade Policies?

Donald Trump's re-election on November 12, 2024, has reignited discussions about the future of U.S. trade policies, particularly his 'America First' approach. Experts predict that within the first 100 days of his new administration, Trump will implement trade policies targeting countries with significant trade deficits, including South Korea. This comes as many voters express frustration over rising prices and stagnant wages, viewing their economic challenges through the lens of lost jobs and diminished opportunities [45e2055b].

In response to these uncertainties, South Korea's Ministry of Trade, Industry and Energy held a virtual meeting on November 13, 2024, with commercial attaches from nine major economies to prepare for changes in U.S. trade policies under President-elect Donald Trump. Deputy Minister Park Jong-won chaired the meeting, emphasizing the need to monitor U.S. trade dynamics that could impact Korea's economy. The business community is particularly concerned about potential changes, including tariffs and the fate of the CHIPS and Science Act and the Inflation Reduction Act [e7d12613].

During a recent roundtable discussion in Seoul, experts including Yeo Han-koo and Yoo Myung-hee highlighted the potential impacts of Trump's policies. Yeo predicts a focus on reducing trade deficits and revitalizing U.S. manufacturing, while Yoo warns that South Korea, currently ranked eighth in terms of trade deficits with the U.S., could be particularly vulnerable to these changes [d0e1cd28].

To mitigate risks, South Korea aims to upgrade existing Free Trade Agreements (FTAs) with countries such as Britain, Chile, and ASEAN, while also negotiating with Mongolia, Thailand, Tanzania, and Serbia. This strategic move is intended to bolster South Korea's trade position in the face of potential U.S. tariffs and trade barriers [6c6cc2b0].

Trump's proposals include increased tariffs on imports, especially from China, as a means to address worker discontent. However, experts caution that this isolationist approach could lead to trade wars and increased costs for consumers, further complicating the economic landscape [45e2055b].

The implications of Trump's trade policies are concerning, especially as the U.S. national debt has surpassed $35 trillion, raising inflation fears among economists. Retaliatory measures from countries like China could destabilize global trade and exacerbate domestic inflationary pressures [45e2055b].

In addition to trade strategies, South Korea is also investing in its semiconductor industry, with plans to provide 17 trillion won (approximately US$12 billion) in low-interest loans to firms in this sector. Furthermore, a nuclear reactor construction deal with the Czech Republic is expected to be signed in March 2025, valued at around 24 trillion won, showcasing South Korea's commitment to diversifying its economic partnerships [6c6cc2b0].

As the nation awaits the implementation of these policies, the balance between immediate market reactions and long-term economic health remains a critical point of discussion. Many voters are hopeful that Trump's administration will address their economic concerns, but the potential repercussions of his policies could complicate the economic landscape significantly. Meanwhile, Canada faces risks from U.S. protectionism affecting its export sector, although its inflation rate remains below 2%, allowing for continued rate cuts [3962a2b7].