Seoul: U.S. President-elect Donald Trump announced on Monday through his Truth Social platform that he intends to impose a 25 percent tariff on all products imported from Mexico and Canada and a 10 percent tariff on Chinese goods above existing tariffs, starting January 20. This move marks his commitment to implementing protectionist trade policies immediately upon taking office, potentially disrupting international trade rules.
According to Yonhap News Agency, Trump justified these tariffs as a response to illegal immigration, crime, and drug issues associated with the U.S. borders. By using tariffs as leverage to address non-economic challenges, Trump aims to pressure top suppliers of goods to the U.S., which include Mexico, China, and Canada, accounting for over 40 percent of U.S. goods imports. This decision could significantly impact South Korea, whose supply chains are intricately linked with these countries.
If China’s exports to the U.S. decline due to increased tariffs, the demand for South Korean
intermediate goods used in production may also drop. South Korean businesses operating in Mexico and Canada could face direct repercussions, as heightened tariffs would elevate the costs of goods produced in these countries and exported to the U.S. Notably, Samsung Electronics, LG Electronics, and Kia have production facilities in Mexico targeting the U.S. market, while South Korean battery companies are building factories in Canada.
Furthermore, if China redirects its export focus to other regions like Southeast Asia and the Middle East due to tariff-induced price competitiveness issues, South Korea could encounter intensified competition in areas such as steel, petrochemicals, textiles, and displays.
Trump’s tariff plans, which include targeting Mexico and Canada, both major partners in the U.S.-Mexico-Canada Agreement (USMCA), could undermine the essence of the free trade accord. The USMCA, which replaced the North American Free Trade Agreement (NAFTA), exempts many imports from these countries from tari
ffs. Imposing tariffs on these allies reflects Trump’s “America First” ideology and could nullify the advantages of the USMCA.
South Korea, which maintains a significant trade surplus with the U.S., might not escape Trump’s scrutiny. Despite having a free trade agreement with the U.S., the example of Mexico and Canada raises concerns about the agreement’s future security. Trump may leverage tariffs against China and Mexico in broader negotiations, making it essential for Seoul to develop counter-strategies.
To safeguard its exports to the U.S., South Korean companies might consider increasing domestic production within the U.S. rather than relying on third-country exports. As trade barriers rise, the South Korean government’s role becomes crucial. It should emphasize the substantial investments made by South Korean companies in the U.S. and propose mutually beneficial deals in areas of potential interest to Trump, such as shipbuilding, nuclear power, and semiconductors, to foster favorable perceptions from
the incoming administration.