[Interview] "Trump 2.0, Comprehensive Expansion of Currency Investigations... Retaliation with $301 Trillion Tariffs if Devaluation Occurs"

Kleet Willems Former White House NEC Deputy Director
Actively Utilizing 301 Trillion Won Against Currency Undervaluation
China Fails to Comply with US-China Phase One Trade Agreement
Will Enforce Compliance with Tariff Measures
Tariffs on Chinese Electric Vehicles Regardless of Production Location
Likely to Amend IRA FEOC Application and Origin Rules
Concerns Over Legislative Attempts on Korean Platform Law

"If former President Donald Trump returns to power, he will aggressively pursue investigations under Section 301 of the Trade Expansion Act against countries that have artificially devalued their currencies and impose tariffs."

Cleat Willems, former Deputy Director of the White House National Economic Council (NEC), stated this in an interview with Asia Economy on the 18th (local time). Willems is a prominent international trade expert who worked at the White House during the Trump administration when the US-China trade war escalated, handling revisions to the Korea-US Free Trade Agreement (FTA) and negotiations on Section 232 steel tariffs. He is currently an attorney at the Washington D.C.-based law firm Akin Gump and is a key figure expected to be appointed in the administration if Trump begins a second term, given his strong connections within the Republican network.

Kleet Willems, former Deputy Director of the White House National Economic Council (NEC)

He said, "The Trump administration initiated an investigation into currency manipulation by Vietnam at the end of 2020 and took action, but the Joe Biden administration halted it. If Trump begins a second term, this action will resume, followed by investigations into currency manipulation by other countries."

Former President Trump views the overvalued dollar as one of the causes of the US trade deficit. Accordingly, he considers exchange rate adjustment a key policy tool and is expected to actively use Section 301 of the Trade Expansion Act, which grants authority to retaliate against unfair trade practices, according to Willems. The US can impose retaliatory tariffs based on this provision, and as seen in the recent increase of tariffs on Chinese electric vehicles to 100% in May, it is possible to impose ultra-high tariffs if desired. This could lead to a "second Plaza Accord," similar to the 1985 agreement where the US lowered the dollar's value against currencies like the Japanese yen and the German mark.

Concerns have been raised that South Korea, which has seen a rapid increase in its trade surplus with the US and a significant depreciation of the won against the dollar, may face pressure to appreciate the won if Trump 2.0 takes office. Willems said, "South Korea is not the top priority, but there is a possibility that an investigation under Section 301 of the Trade Expansion Act related to currency devaluation could be conducted against Korea," adding, "All countries with devalued currencies could be subject to investigation."

Willems predicted that the top priority of Trump 2.0's trade policy will be a very aggressive tariff increase based on a thorough reciprocal trade policy. Trump has already announced plans to apply a universal tariff of 10-20% on all imports and a blanket 60% tariff on Chinese goods.

He said, "The trade agenda of Trump’s second term will include tariff increases to raise US tariffs to the level of trading partners," and "Tariffs will be actively used to obtain more favorable treatment from countries worldwide, including China." He also forecasted, "Negotiations to lower trade barriers with allies and diversification of supply chains away from China will also be priorities in trade policy."

He also clearly stated that China will again be the main target if Trump 2.0 becomes a reality.

Willems said, "The Biden administration has abandoned enforcing China’s commitments under the US-China Phase One trade agreement agreed upon by the previous Trump administration," and "Trump 2.0 will force China to fully comply with this agreement." Under the Phase One trade deal, China agreed to increase purchases of US goods and services but failed to fulfill this promise. Willems expects that Trump 2.0 will actively use tariffs to urge China to comply with the agreement.

He also expects a strengthening of measures to block China’s circumvention of tariffs through Mexico. Willems said, "China is expanding investments in electric vehicles in third countries like Mexico, raising serious concerns that products can be exported to the US without paying tariffs," and "Trump 2.0 may consider imposing tariffs on electric vehicles produced by Chinese companies regardless of production location to address this issue." He added, "Regulations similar to the Foreign Entity of Concern (FEOC) under the Inflation Reduction Act (IRA) could be applied to determine whether a company is Chinese," and "There is a high possibility of considering strengthening rules of origin under the United States-Mexico-Canada Agreement (USMCA) related to automobiles."

This means that origin rules could be changed to impose tariffs on Chinese goods based on "nationality" rather than "production location" to block China’s evasive tactics. He also anticipated the possible application of IRA FEOC-like regulations introduced by the Biden administration. According to these regulations, joint ventures with 25% or more Chinese capital are designated as FEOCs, and electric vehicles produced by FEOCs do not receive subsidy benefits. This suggests that even if electric vehicles are produced in third countries like Mexico, high tariffs could be imposed if Chinese capital holds a certain stake.

However, Willems drew a line regarding concerns that tariff increases could fuel inflation, dubbed "Trumflation" (Trump + inflation). He explained, "Trump 2.0 plans to reduce taxes, cut regulations, expand US energy exploration, and reduce government spending, all of which will help suppress inflation."

Regarding recent expansions of US investments by domestic semiconductor and electric vehicle battery companies, Willems said, "Former President Trump would welcome this," but he also expects that Trump 2.0 may implement additional pressure measures to expand US exports and support US companies. He expressed concerns about the government’s legislative push for the Platform Fair Competition Promotion Act (hereinafter the Platform Act), which preemptively designates and regulates domestic and foreign platform companies.

He said, "The Korean National Assembly should not introduce discriminatory policies like the Platform Act that target US technology companies," and "Trump 2.0 views such restrictive measures negatively and is likely to respond with retaliatory actions such as Section 301 tariffs under the Trade Expansion Act." He emphasized, "Korea still has work to do to create a more favorable environment for US exports and US companies," and "It is desirable to avoid unnecessary tensions like these."

This content was produced with the assistance of AI translation services.