[De-Globalization? New Order!] ① US Departure or the Advent of a New Trade Order?

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The era of comprehensive globalization that has lasted for 30 years is coming to an end. Value chains that relied on low tariffs, free trade, and global division of labor can no longer be sustained. The United States has disregarded free trade agreements (FTAs) and imposed uniform and differential tariffs on countries around the world, while the World Trade Organization (WTO) has effectively ceased to function. Now, international trade is governed not by a 'trade order' but by a 'transaction order.' Negotiation and politics, rather than law and norms, have come to dominate. South Korea, too, is being called upon to make a strategic shift to minimize costs and maximize opportunities within this new trade order.

With President Trump's re-election, the second administration initiated a de facto 'tariff system reset,' starting with Executive Order 14257 on April 2, 2025, followed by additional revised orders on July 31 and September 5. This new system went beyond existing FTAs and WTO concession tariffs, introducing a reciprocal tariff regime with basic rates of 15-25% by country, product, and condition, and in some cases, up to 50%. This is not simply protectionism, but rather an overlay of new rules atop existing international trade regulations.

South Korea was no exception. Despite the Korea-US FTA, new tariffs of 15-50% were imposed on Korean automobiles and steel. This clearly demonstrated that tariff imposition based on the US International Emergency Economic Powers Act (IEEPA) can take precedence over FTAs. To maintain access to the US market, South Korea ultimately had to respond to a 'deal' situation.

Jung Ing-gyo, former head of trade negotiations, said in a recent interview with Asia Economy, "The moment different tariff rates are imposed by country, the foundation of the WTO is shaken," and diagnosed, "Going forward, there could be a significant number of cases violating national treatment (NT)."

He added, "Previously, the US cited security crises, such as with the 'fentanyl tariff,' and at one point imposed a uniform 10% globally. Now, it is differentiated by country. The US has effectively created a situation where coexistence with the WTO is impossible."

In reality, there is virtually no institution left to mediate international disputes. The WTO Appellate Body has been paralyzed since 2019, and last month, the US effectively declared the end of the WTO system. Member states have acknowledged the de facto suspension of the Dispute Settlement Body (DSB), and only the Multi-Party Interim Appeal Arbitration Arrangement (MPIA), involving the European Union (EU), Chile, Brazil, and others, is operating in a limited capacity. However, the MPIA is only effective among participating countries. The binding force of the WTO’s multilateral rules has all but collapsed.

FTAs have also lost their power. The Trump administration has reinterpreted or neutralized existing agreements based on a 'national interest first' principle. As a result, the trade environment has shifted from rules to transactions, and from systems to the logic of politics and power.

The realities of this new era are well illustrated by the cases of Switzerland and Canada. In early August, the US imposed an unusually high tariff of 39% on Swiss products, much higher than the EU’s 15%. The Swiss Federal Council immediately expressed "deep regret" and entered bilateral negotiations, but the outcome was determined more by political sentiment than economic logic. Swatch even released a watch satirizing the '39%' tariff, turning the trade dispute into a public opinion battle. Trade has become a political and media event.

Canada, after imposing retaliatory tariffs since March, withdrew most of them on the 1st of this month. Instead, it maintained retaliation only on automobiles, steel, and aluminum, entering a 'big deal' negotiation phase with the US. Rather than a full-scale trade war, Canada left only core industries on the table, seeking a breakthrough through a political and security package. Both cases suggest that political relationships and emotional responses, rather than economic rationality, now dominate decision-making.

There are differing interpretations of this situation. One view is that 'deal-centered bloc trade' centered on the US has become the norm. Canada’s choice to give up some tariffs in exchange for security and energy cooperation exemplifies this trend.

The movement toward bloc-based global trade is deepening South Korea’s concerns. Jung noted, "BRICS could expand beyond a simple political alliance to become an economic cooperative body," and added, "President Trump has been particularly sensitive to such counter-blocs." However, he also pointed out, "It is uncertain whether BRICS would be willing to forgo the US market at the cost of economic losses." The analysis is that the US will not impose high tariffs on all countries, but will selectively draw some into its camp through a so-called 'prisoner’s dilemma strategy.'

The other perspective is that this is a 'US-only departure.' The EU, South Korea, Japan, and others are still trying to uphold WTO rules. The EU is maintaining the appellate process through the MPIA and strengthening regional rules to defend multilateralism. In other words, rather than a global shift to bloc trade, the US alone is breaking away from the established order and pursuing an independent course.

Regardless of the interpretation, South Korea, given its high dependence on the US, cannot avoid the direct impact of US tariff measures. Major exports such as automobiles and steel are now subject to reciprocal tariffs, and the added uncertainty in global supply chains makes the shock inevitable. In the short term, negotiations are needed to reduce industry-specific damage, while in the long term, there is a growing call to carefully design detailed conditions such as grace periods and snapback clauses.

South Korea now faces the task of managing both the 'rules axis' and the 'deal axis.' Alongside the EU, utilizing the MPIA to secure at least minimal dispute resolution capabilities, as well as expanding participation in regional trade rule networks such as considering joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), are being discussed. There is also a call for proactive responses to new trade norms in the post-WTO era, such as the EU’s digital trade rules and the Carbon Border Adjustment Mechanism (CBAM), to link up with the emerging regulatory framework.

Meanwhile, in the US-style transaction order, financial, investment, and energy purchase commitments are increasingly directly linked to tariff rates, leading to analysis that supply chains need to be managed together with security, energy, and currency (swaps).

Experts believe that, for the time being, a 'hybrid order where rules and transactions coexist' will continue. Industries that desperately need access to the US market will have to follow the US-style transaction order, while intra-regional and third-country trade can still rely on traditional rules. Therefore, it is argued that South Korea should take a 'dual-track' approach: responding in the language of transactions in negotiations with the US, while strengthening the language of rules in cooperation with the EU, ASEAN, and others.

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