Warnings Continue: "Korea Also at Risk if Trump Regains Power"

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In the upcoming U.S. presidential election this November, if former President Donald Trump is elected, it is expected that the intensity of American isolationism and protectionism will increase. Domestic research institutions are unanimously calling for South Korea to proactively prepare for the risks associated with a Trump victory.

On the 16th, LG Economic Research Institute released a report titled "Geopolitical Risks in 2024 Seen Through Major Country Elections," predicting that if former President Trump wins the U.S. presidential election this November, the business environment surrounding the United States will change drastically.

Former President Trump has previously announced a 10 percentage point tariff increase on all countries under the name of a "universal base tariff." He also proposed a retaliatory tariff policy called the "Trump Reciprocity Act," which signifies a return to American isolationism. Trump has clashed with allied countries due to his isolationist foreign policy that prioritizes the United States above all else.

Trump claimed that the Russia-Ukraine war could be ended in a day and that the costs should be passed on to the EU (European Union). He also considers climate change and decarbonization to be a hoax and stated that electric vehicle promotion policies are the main cause of the decline of American manufacturing, calling for the abolition of related policies. The research institute analyzed that such policy changes would have a significant global impact.

Kang Jun-mo, a research fellow at LG Economic Research Institute, explained, "The United States is the country that has the most significant influence on the international order politically and economically," adding, "If Trump is elected and the Republican Party controls both the House and the Senate, the likelihood of Trump's policies becoming reality is high."

The Korea Institute for Industrial Economics and Trade predicted that if former President Trump succeeds in returning to power, he will pursue high-intensity protectionist policies. In a report titled "Prospects and Implications Following the Evolution of U.S. Economic Sanctions Against China," released on the 14th, the institute stated, "The outcome of the U.S. presidential election will not fundamentally affect the U.S. stance on economic sanctions against China," but also forecasted, "If Trump is re-elected, he will implement more intense protectionist policies through tariffs than during his first term."

In particular, it stated, "Trump will actively utilize Section 232 of the U.S. Trade Act, which restricts imports for U.S. national security purposes, and Section 301 of the U.S. Trade Act, which imposes tariffs on countries that do not engage in fair trade, to achieve his goals." This means that U.S. tariff barriers will become stronger, which could negatively impact South Korea as well.

Former U.S. President Donald Trump [Image source=Yonhap News]

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The Korea International Trade Association (KITA) predicted that Trump's return to power would be the biggest variable affecting South Korea's exports to the U.S. Trump is also considering repealing the Inflation Reduction Act (IRA) led by President Biden, raising concerns about negative impacts on Korean companies that have invested the most in the U.S. since the IRA's enactment.

Je Hyeon-jeong, head of KITA's Washington office, emphasized, "The biggest variable affecting our companies' exports to the U.S. in the future will be the results of the U.S. presidential and congressional elections," adding, "Our companies need to review and prepare for the economic and trade-related pledges of major presidential candidates in advance."

The Korea Institute for International Economic Policy also analyzed that if Trump is elected, the repeal of the IRA could deal a blow to South Korea's electric vehicle and battery industries. The institute pointed out, "If Trump is elected, there is even a possibility that all existing policies related to electric vehicles and batteries could be abolished," and advised, "Korean companies and the government that are investing or planning to invest in the U.S. should consider this significant political factor as a major variable in their decision-making."

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