In the recent U.S. presidential election, former President Trump succeeded in reclaiming the White House, signaling an impending sea change for the global economy. In this context, the Federation of Korean Industries (hereinafter, FKI) organized a panel discussion, inviting former ministers for trade of the Republic of Korea to discuss the outlook for trade policy under the second Trump administration and potential strategies that may be adopted by the Korean business community. 

  With the reelection of former president Trump, the America First policy theme is anticipated to become more pronounced. It is unclear whether the Inflation Reduction Act (IRA) and other key policies of the Biden administration would continue to be pursued and there is growing concern in the global trade environment.

Trade experts with extensive experience—from negotiating the KORUS FTA to navigating the waters of the first Trump administration—gathered for a panel discussion

  In his opening remarks, Chang-beom Kim, vice chairman and CEO of the FKI, said, “With the return of President Trump, Korea and the global community can anticipate significant changes.” He noted, “This poses a particular challenge for Korea, given our export-driven economy and heavy reliance on foreign markets.” He emphasized, “The Korean government and business community will need a clear-eyed assessment and a refined response to the incoming U.S. administration’s trade policy direction.” 

  The panel discussion featured seasoned trade experts who had directly shaped Korean trade policy as top-ranking trade officials. Each speaker has direct experience negotiating with their U.S. counterparts and was involved in key policy responses to both the first Trump administration and the Biden administration. 

[Han-koo Yeo] Outlook on the second Trump administration’s trade policy: Forceful and speedy action expected within the first 100 days of taking office

  Joining the discussions online from the U.S., Han-koo Yeo, senior fellow at the Peterson Institute for International Economics (Minister for trade of the Republic of Korea, 2021-2022) gave a spirited description of the local response to Trump’s taking back the White House, “President Trump beat expectations and rode the so-called “Red-wave” to a sweeping victory. I expect that the second Trump administration’s economic and trade agendas will be carried forward forcefully and speedily, within the first 100 days that President Trump is sworn in.” 

  On future policy direction, Yeo said, “The second Trump administration’s priorities are 1) Reducing trade deficits, 2) Reviving U.S. manufacturing, and 3) Securing an upper hand in the U.S.-China competition for hegemony. Tariffs and other trade policies will serve as key instruments for achieving these priorities, serving as the basis for driving the America First policy forward.” He added, “Korea will need to initiate and operate a nimble crisis response system on both public and private levels.” Recalling his direct involvement in negotiating KORUS FTA amendments and responding to the Trade Expansion Act, Section 232 Tariffs on Steel and Aluminum, while serving as commercial attaché at the Korean Embassy in Washington, D.C., Yeo added, “Compared to when President Trump first took office, the status of Korean businesses have evolved over the past 8 years, in terms of investment, etc. So, it is entirely possible for Korea to turn crisis into opportunity.” 

  The presentation by Senior Fellow Yeo was followed by a panel discussion moderated by Chul Chung, president of the Korea Economic Research Institute. Topics included policy directions of the incoming administration, such as △Utilization methods of and the future of the KORUS FTA, △The possible implementation of universal baseline tariffs, △Trade policy issues such as the IRA and the CHIPS Act, and △Foreign policy issues such as U.S.-China relations, and their implications for Korean businesses. 

[Jonghoon Kim] Terminating or rewriting the KORUS FTA to implement universal baseline tariffs would be difficult, but Korea must be prepared

  Chief negotiator of the 2006 KORUS FTA negotiations, Jonghoon Kim, member of the 19th session of the National Assembly (Minister for trade of the Republic of Korea, 2007-2011), said that during the second Trump administration, “The barriers along borders will reach new heights together with barriers to trade.” On the possible implementation of universal baseline tariffs and renegotiations of the KORUS FTA, Kim said that, “Both the U.S. and Korea are signatories to FTAs with other numerous countries. It will be a tough choice for the U.S. to implement universal baseline tariffs, effectively terminating or rewriting the KORUS FTA, considering the impact to general foreign relations of the U.S. with other countries and the potential effect to the U.S. economy.” Kim added, “However, if negotiations for amendment become necessary, the interests of both countries must reach a reasonable balance.” 

[Taeho Bark] Grants rendered through the IRA and the CHIPS Act may be reduced... Cannot exclude possibility of a grand bargain being struck between the U.S. and China, as attempted during the latter years of the first Trump administration

  Taeho Bark, president of the Lee & Ko Global Commerce Institute (Minister for trade of the Republic of Korea, 2011-2013) commented on the incoming Trump administration’s policy, “If universal baseline tariffs were applied to Korea, there must be no doubt that this is in violations of the principle of abolishing reciprocal tariffs, per the KORUS FTA.” He added, “Many regions that voted Republican receives benefits through the IRA, so, I do not expect there would be sudden changes, including cuts to grants. As for the CHIPS Act, I do not expect there would be big changes, but there is the possibility that grants may be reduced.” On the subject of the conflict between U.S. and China, which peaked during the first Trump administration, Bark commented, “The second Trump administration is likely to maintain the measures put in place by the Biden administration to counterbalance China, with the potential to impose additional pressure through tariffs up to 60%. However, the possibility of attempting a grand bargain with China cannot be excluded.” 

[Myung-hee Yoo] The biggest priority of the second Trump administration will be resolving trade deficits... The WTO faces its biggest crisis

  Myung-hee Yoo, professor at Seoul National University Graduate School of International Studies (Minister for trade of the Republic of Korea, 2019-2021) shared insights from her negotiations with the first Trump administration, stating, “The size of trade deficits is the metric by which the Trump administration gauges bilateral relations.” She added, “Korea ranks 8th in terms of trade deficit size with the U.S., so we may not become the Trump administration’s highest priority. However, Korea could still become a target after other countries, such as China and Mexico, and so, we need to make methodical preparations.” 

  Yoo recalls from her experience negotiating with the key USTR representative of the first Trump administration, Robert Lighthizer, “The U.S. government at the time ① Was primarily concerned with the size of trade deficits and was less concerned with alliance considerations, ② Compliance with the WTO or the KORUS FTA terms were secondary to reducing trade imbalances, and ③ Negotiations were expected to move swiftly, with measures potentially imposed within a month or two of initiating negotiations if progress was not achieved. She added, “Tariffs serve a dual purpose for President Trump: as a tool to reduce trade deficits and as for leverage in negotiations.” Yoo commented, “This is both a challenge and opportunity for the Korean negotiators. If we can engage in swift and effective negotiations, our requests or duty waivers could be accommodated, despite potential unilateral measures from the U.S.”

  On the future of the WTO under the second Trump administration, Yoo remarked, “The WTO faces its biggest crisis since its inception 30 years ago,” adding, “The WTO regime already stood on shaky ground when the first Trump administration took office eight years ago. With no significant changes implemented during the past four years of the Biden administration, the second Trump administration is likely to have more confidence in advancing trade policies that diverge from WTO norms.” She added, “If the WTO is not overhauled through intensive reform, we may find ourselves in a new era where the rules-based multilateral trading system no longer functions.” 

Sea change anticipated in trade policies under the second Trump administration... A clear-eyed and refined approach is necessary

The FKI to convene the 35th KUSBC-USKBC Joint Plenary Meeting in Washington, D.C. next month, and will engage in outreach efforts toward the U.S.

  Bong Man Kim, vice president of the International Network Department and organizer of this event, stated, “We anticipate substantial ripple-effects on the Korean economy from the recent U.S. presidential election results. Nevertheless, this is a moment for clear-eyed decisions and decisive action, not for yielding to disorder.” He added, “Building on insights gathered from the first Trump administration, we need to swiftly assess the likely direction of trade policies.” He further noted, “To this end, the FKI will jointly convene the 35th KUSBC-USKBC Joint Plenary Meeting with the U.S.-Korea Business Council early next month in Washington, D.C.” He continued, “The FKI will sustain our outreach efforts toward the U.S., in close collaboration with the Korean business community.”

※ [Attachment] Overview of the Panel Discussion and Speakers’ Profiles