President-elect Donald Trump has reaffirmed his plan to implement significant tariffs on key U.S. trade partners starting on the first day of his administration next year.
What will the consequence be, and how realizable is his plan actually?
1.) What Trump’s most recent tariff plans are?
President-elect Donald Trump has announced on his social media platform Truth Social that he would slap massive new tariffs on China, Mexico, and Canada.
This includes a 25 percent tariff on all products from the neighboring countries of Canada and Mexico, to remain in effect until those countries take action to stop the flow of drugs and illegal migrants crossing into the United States.
He also announced plans to increase existing tariffs by an additional 10 percent on all goods imported from China, until the Chinese government implements measures to combat drug smuggling, particularly of the synthetic opioid fentanyl.
Washington estimates that almost 75 thousand Americans were killed by fentanyl last year.
And these tariffs are expected to take effect on January 20, 2025, the first day of his administration, as one of his first executive orders.
U.S. President Joe Biden says he hopes President-elect Donald Trump rethinks his tariff plan for Canada and Mexico, warning that Trump’s tariff threats are counterproductive.
2.) What other impact are these tariffs expected to have?
On the campaign trail, Donald Trump had repeatedly threatened big tariff hikes as part of his “America First” agenda, which seeks to bolster domestic industries.
And while these efforts are intended to boost U.S. industries and the economy as a whole, they may raise prices for U.S. consumers.
Here’s what an expert said might happen.
But a lot of American companies, especially automobile companies, are very worried because the automobile industry, the U.S. automobile companies who have factories in Detroit, depend on factories in Ottawa for their parts and raw material.”
And this may lead to manufacturers relying on imported materials passing the higher production costs onto buyers.
But other countries, because they have to keep the U.S. in mind, will have to strengthen their monitoring systems and so on. So it will mean a rise in trade-related costs for everybody. And it will also mean that there might be retaliatory tariffs.
3.) What does this mean for South Korea?
The tariffs imposed on Canada and Mexico —two of the U.S.’s largest trading partners —-signal that South Korea is highly likely to be subject to such tariffs as well.
Tariffs ranging from 10 to 20 percent more are expected to be imposed. If that is the case the volume of exports from South Korea to the United States will drop.
What South Korean companies can do to minimize the impact?
“The best we can do is to first point out how important Korean goods are for the American markets and American consumers. And second, I think we need to bargain hard. We need to show that there will be consequences not only on the Korean markets but American markets as well.”, according to Arirang news’s economics correspondent Lee Soo-jin.
The government is also moving to prepare proactive, scenario-based response measures.
The Presidential Office held an emergency meeting on Wednesday, led by Chief-of-Staff for Policy Sung Tae-yoon , to evaluate the potential effects of proposed U.S. tariffs on Korean businesses. Sung warned that these tariffs could harm Korean firms relying on parts from Mexico and Canada for U.S.-based manufacturing. And although the direct impact on Korean firms from Chinese tariffs may be limited, reduced Chinese exports to the U.S. could hurt Korea’s intermediate goods exports to China.
4.) Are there any factors that may make it unlikely for the proposed tariffs to materialize as planned?
It’s unclear how Trump will be able to carry out his plans as many goods coming to the U.S. from Mexico and Canada are exempted from tariffs under the terms of the United States-Mexico-Canada Agreement that was actually negotiated during Trump’s first term and went into effect in 2020.
The agreement was made to modernize trade rules while maintaining tariff-free trade for most goods exchanged between the three countries and the 25 percent tariff would undermine this.
It also includes mechanisms to resolve trade disputes, meaning if the U.S. imposes unilateral tariffs, it would expose the U.S. to legal challenges by Mexico and Canada.
And according to U.S. Census Bureau data for September 2024 on goods traded, Mexico is the largest trading partner of the U.S.,.. followed by Canada and China,.. the very three countries that he has said he would impose tariffs on.
As for China, while it is not part of a formal free trade agreement with the U.S. like Mexico and Canada, their trade relationship is still governed by the World Trade Organization, which they are both members of,. that seeks to limit unilateral tariffs.
This is why it is seen more as a move to pressure trade partners into renegotiating terms that favor the United States, leveraging the threat of tariffs as a bargaining tool instead of putting them into effect directly.
Source: Arirang News
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