Trump Takes a Step Back in the 'Tariff War'... It's Still Too Early to Relax

U.S. President Donald Trump is showing signs of stepping back from the 'tariff war' by postponing the tariff increase on Mexico. While the domestic industry is breathing a sigh of relief, some point out that it is still too early to be complacent.

On the 4th, the domestic industry evaluated that the initial predictions about President Trump's decision to postpone the tariff increase were somewhat accurate. Previously, KOTRA analyzed, "The Trump administration's pressure to raise tariffs on Mexico and Canada is a card for renegotiating the USMCA (United States-Mexico-Canada Agreement)," adding, "Although the USMCA is scheduled for review in 2026, Trump wants to renegotiate sooner."

However, concerns have not completely disappeared. An industry insider said, "This decision by the U.S. allows us to breathe a little easier, but the possibility of imposing tariffs by industry still remains," and added, "Furthermore, Korea cannot be excluded as a potential target during the U.S.'s review of various trade agreements in the future." The tariff postponement on Mexico is simply a result of negotiations with a trade partner, but the possibility of imposing tariffs on specific industrial sectors still exists.

Previously, President Trump announced plans to impose tariffs on semiconductors, steel, pharmaceuticals, aluminum, copper, oil, and gas. If negotiations with Mexico, Canada, China, and others fail, the next targets for tariff increases are likely to be the European Union (EU), followed by Asian countries.

In fact, after Trump signed executive orders imposing tariffs on Mexico, Canada, and China, many in the industry predicted that the next targets would be Asian countries including Korea, Japan, and Vietnam. Especially, Korea's position in the U.S. trade deficit ranking is higher than Canada’s, which has intensified these concerns. According to an analysis of the U.S. Department of Commerce's export-import trend report by the Korea International Trade Association, the cumulative U.S. trade deficit with Korea in the first half of last year was $34.078 billion, ranking 6th among U.S. trade partners. This amount is higher than Canada’s $29.193 billion (9th place).

Korea has enjoyed nearly zero tariffs on most items through the Korea-U.S. Free Trade Agreement (FTA). The U.S. promised to completely eliminate tariffs on 100% of goods to Korea by both item count and value, and currently, tariffs have been eliminated on over 99% of items. Notably, Korea recorded all-time highs last year with $127.8 billion in exports to the U.S. and a trade surplus of $55.7 billion. The trade surplus increased by 25% compared to the previous year.

If the U.S. imposes tariffs by industry as announced or applies universal tariffs, major Korean export items to the U.S. such as automobiles, automotive parts, computer parts, and petroleum products will inevitably be affected. The Korea Institute for International Economic Policy (KIEP) warned in an October report last year that "If the U.S. imposes universal tariffs on countries including Korea and major countries respond in kind, Korea's exports could decrease by up to $44.8 billion." It also predicted a decline in real Gross Domestic Product (GDP) ranging from 0.29% to 0.69%.

The Trump administration plans to comprehensively review existing trade agreements, export control systems, and countries' currency policies by April 1 and then take additional measures. Before this deadline, voices are calling for the Korean government to strengthen its negotiating power to minimize damage.

Kang Gu-sang, head of the North America and Europe team at KIEP, advised, "Considering Korea's trade surplus with the U.S., the U.S. has sufficient grounds to impose tariffs," and added, "Korea should consider strategies to strengthen negotiations and cooperation with the U.S. by leveraging strengths in sectors such as shipbuilding and SMR (Small Modular Reactors)."

Regarding this, an official from the Ministry of Trade, Industry and Energy said, "We are reviewing response strategies together with related industries directly or indirectly affected by the (U.S.) tariff measures and are closely monitoring trends in major countries facing similar situations such as Europe and Japan," adding, "We plan to devise the best possible measures by utilizing all available cooperation channels and maintaining close communication with the new U.S. administration."

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