"Trump Starts 2000 Trillion-Won Gamble"... Korea Is Not Far Behind [Why&Next]

U.S. Raises Tariffs on Mexico, Canada, and China Starting on the 4th
Three Countries Immediately Announce Retaliation... Fears of a Retaliatory Tariff Domino
First Tariff Measure Covers $1.4 Trillion... Three Times the First Term
Concerns Over Rising Inflation... "This Year's GDP to Drop by 1.5 Percentage Points"
South Korea, With Record Trade Surplus With U.S. Last Year, Also Targeted

"Trump's tariffs have started a $1.4 trillion (about 2042 trillion won) gamble with the economy and prices." (U.S. CNN broadcast)

U.S. President Donald Trump has finally dropped the 'tariff bomb.' It has been just 13 days since his inauguration. While his first term focused on a trade war with China, his second term officially targeted Mexico and Canada, signaling that even allied countries are not exempt from the tariff war. The scale of imports affected by this first tariff measure in his second term amounts to $1.4 trillion, three times the total of the first term, making it difficult to gauge the future impact on the U.S. economy, including inflation.

The governments of Mexico, Canada, and China have all declared retaliatory tariffs, raising fears that the global trade environment and world economy will face increased uncertainty. Within the U.S., concerns about 'stagflation' (economic slowdown accompanied by rising prices) triggered by Trump's tariff bomb are emerging, but President Trump insists that pain must be endured for America's golden era, showing no intention of backing down.

U.S. imposes tariffs on Mexico, Canada, and China from midnight on the 4th... Three countries immediately announce retaliation

The Trump administration in its second term will impose a 25% tariff on all imports entering the U.S. from Mexico and Canada starting at midnight on the 4th (local time). An exception will be made for Canadian energy products, which have a high import dependency in the U.S., with a reduced tariff of 10%. For all Chinese imports, an additional 10 percentage points will be added on top of existing tariffs. This follows President Trump's signing of an executive order on the 1st based on the International Emergency Economic Powers Act (IEEPA) to raise tariffs. The executive order also includes provisions to further increase tariff rates if Mexico or Canada take retaliatory measures.

Mexico, Canada, and China immediately protested and announced retaliatory responses. Canadian Prime Minister Justin Trudeau declared that Canada would impose a 25% tariff on $105 billion (about 153 trillion won) worth of U.S. products, including automobiles, trucks, agricultural products, steel, and aluminum. Mexican President Claudia Sheinbaum also hinted at retaliatory measures encompassing both tariff and non-tariff actions. The two countries promised to jointly respond to the U.S. through communications between their leaders. China also protested by announcing it would file a complaint against the U.S. at the World Trade Organization (WTO). As a result, fears are growing that the domino effect of retaliatory tariffs will spread uncontrollably, leading to inflation, supply chain disruptions, and a decline in growth rates, signaling the start of a full-scale global trade war.

Trump's second term first tariff scope reaches 2000 trillion won, 'three times the first term'... Concerns over rising inflation and falling growth rates

As President Trump had announced on his inauguration day on the 20th of last month, the tariff war that materialized on the 1st of this month is analyzed to have unpredictable aftershocks due to the much broader targets and scope of tariff imposition compared to the first term. While the first term waged a trade war against China, the U.S.'s biggest competitor, the second term imposes high tariffs on Mexico and Canada, which are free trade agreement (FTA) partners and allies. Until now, the three countries have applied virtually tariff-free treatment on almost all products under the United States-Mexico-Canada Agreement (USMCA). Christine McDaniel, senior researcher at the Mercatus Center at George Mason University, expressed concern that "imposing a 25% high tariff on the closest trading partners risks destroying the North American economic community that the U.S. relies on," warning that the closely connected North American supply chain could collapse and inflation could soar due to this measure.

It is also noteworthy that the scope of Trump's second term first tariff measure has greatly expanded compared to the entire first term. According to the U.S. Tax Foundation, during Trump's first term, imports worth $380 billion (about 554 trillion won) entering the U.S. were affected by tariff increases. However, the import range affected by Trump's tariff measure on the 1st reaches $1.4 trillion, far exceeding three times the entire first term. The possibility of causing U.S. price increases has also grown. Wolfe Research predicted that the tariff increase could raise car sales prices in the U.S. by about $3,000 (about 4.37 million won).

If a vicious cycle of rising import prices, increased consumer prices, and reduced consumption occurs, economic growth rates are also expected to decline. Global accounting firm Ernst & Young predicted that if Mexico, Canada, and China impose retaliatory tariffs on the U.S., the U.S. GDP growth rate will fall by 1.5 percentage points in 2025 and 2.1 percentage points in 2026. Gregory Daco, chief economist at Ernst & Young, pointed out that "the sharp tariff increases by the U.S. on trading partners could cause stagflation shocks along with financial market volatility."

President Trump, seemingly aware of concerns about the negative impact on the U.S. economy, stated on his social media platform Truth Social on the same day, "There may or may not be pain," adding, "We will make America great again, and all of this will be worth paying for. The results will be tremendous."

Possibility of last-minute tariff negotiation settlement... South Korea, with large trade surplus with the U.S., also targeted

However, since Mexico and Canada have left room for negotiation, the possibility that the U.S. may lower tariff rates through future talks cannot be ruled out. Both Prime Minister Trudeau and President Sheinbaum have announced retaliatory measures but have also called for dialogue and cooperation. There is also a prospect of a negotiation settlement just before the tariff imposition deadline at midnight on the 4th. U.S. investment bank Goldman Sachs predicted on the same day that "considering economic damage and conditions such as suppressing fentanyl inflows, the tariff imposition could be temporary," and that "there is room for compromise at the last moment just before the tariffs take effect."

Amid the tariff war that materialized immediately after the launch of Trump's second term, attention is also focused on who the next target will be. It is widely expected that the European Union (EU) and BRICS (Brazil, Russia, India, China, South Africa) will be targeted. South Korea, ranked 8th among U.S. trade deficit countries, also seems unlikely to escape President Trump's scope. South Korea's trade surplus with the U.S. last year was $55.69 billion (about 81 trillion won), the largest ever. Especially, a large trade surplus occurred in the automobile sector, which President Trump emphasizes. Moreover, President Trump has specifically pointed to semiconductors, South Korea's largest export item, warning of tariff imposition, raising concerns that Korean companies may soon face a direct hit.