U.S. Trade Policy Reshaping:
Choices for Korean Companies
Deborah Elms, Head of Trade Policy, Hinrich Foundation

Q. How do you assess the direction of the Trump administration’s current trade policy, and what do you expect its priorities to be in the second half of its term? The U.S. recently introduced a series of Section 301 trade measures, including investigations related to forced labor and excess industrial capacity. This follows the Supreme Court’s invalidation of the IEEPA tariffs and the Trump administration’s subsequent shift to Sections 232, 301, and 122 as the legal basis for tariff action.

A. U.S. President Donald Trump has few fixed ideas, but he has spent decades worrying about bilateral trade deficits. He returned to office in 2025 determined to address what he sees as fundamental unfairness in the global economic system where the U.S. has spent far too long being “ripped off” by everyone. He has been enthusiastically using his favorite tool, tariffs on imports. As your question notes, in pursuit of his objective of rebalancing trade to be more favorable to the U.S., he has reached for a wide range of different trade and tariff tools and used these for multiple purposes and against all U.S. trade partners.
This pattern of using every option in the trade toolbox, no matter how legally dubious, is set to continue for the rest of his administration. Although the court system has attempted to provide some restraints on his actions, even a ban on using tariffs under one tool, IEEPA, by the U.S. Supreme Court has not daunted his team. He has simply turned to different statutes including his latest actions to use Section 338 from 1930 against Canada. Section 338 gained notoriety for being part of a package of legislation known as Smoot-Hawley which is widely seen as a contributing cause of the Great Depression.

Q. How would these additional tariffs reshape supply chains across Asia and affect intra-regional trade? Under Section 301 actions related to forced labor, countries covered by the measure face additional tariffs, while those outside its scope effectively face no new burden. Your earlier concern that this could reshape supply chains now appears to be materializing.

A. The use of Section 301 is especially concerning, as this tool is more likely to survive legal challenges. It is adaptable and coverage can be easily changed, such as by increasing tariff rates or adding new products to the coverage. The use of Section 301 against 60 U.S. trade partners will alter some supply chains although because everyone received either 10 or 12.5%, most companies are not disadvantaged relative to their own foreign competitors in the U.S. market. Other uses of Section 301, including against Brazil for a range of alleged unfair practices or against 16 major trade partners like Korea, Japan, the EU and Canada for alleged problems of excess capacity could push more companies to change supply chains and manufacturing footprints to avoid high tariff locations.

Q. What criteria should Asian companies use when reconfiguring their production and sourcing bases, including when considering investments in the United States? More Asian companies are expanding production in the U.S. to avoid tariffs and secure policy incentives, although frequent policy changes mean this may not always be the safest option.

A. The problem with investing in the U.S. to avoid the current high tariffs is that companies have to make a bet that tariff walls will continue to be used by future U.S. administrations. For many firms that do not currently manufacture in the U.S., there are sensible reasons for not doing so including higher costs of production. These higher costs are only offset if tariffs and other forms of protection remain in place. If these are later removed, the economics of U.S. investments may shift unfavorably.

Q. How viable are plurilateral regional agreements such as the CPTPP and RCEP, as well as trade cooperation among Global South economies in ASEAN, India, and the Middle East, as alternatives for Asian economies seeking to reduce their dependence on the U.S. market? What conditions must be met for such open plurilateral cooperation to be genuinely effective?

A. Plurilaterals have always been useful, but they are becoming a vital part of any middle power strategy. Without some mechanism to lower risks and increase certainty of future trade and economic arrangements with important markets, middle powers could be left to face great power competition entirely on their own. Trade agreements like the CPTPP broadly promise qualifying firms zero tariffs and open market conditions for services and investment. These pledges of treatment have always been helpful, but at a time of increasing economic turbulence, they are going to become a critical pathway to economic growth, especially for smaller businesses that cannot compete in a high tariff, high compliance cost environment in big markets.

Q. Beyond the 15% tariff rate agreed between Korea and the United States, what product-specific tariffs or structural tariff risks should the Korean government and Korean companies be watching, and how should businesses prepare? Korea has been affected by U.S. Section 301 measures related to forced labor and is also among the countries covered by the Section 301 investigation into excess industrial capacity. There is particular concern that measures stemming from the latter, as well as Section 232 measures, could continue to affect major Korean industries such as semiconductors, automobiles, batteries, and steel.

A. These are genuine concerns. Despite the existence of a free trade agreement, negotiated once again under the first Trump administration, the U.S. has not hesitated to punish Korea for alleged unfair trade practices. While future administrations may be less keen to do so, the risks of continued tariff application is high, as the revenue generated by tariffs landing directly into the U.S. Treasury will be hard to reject. Korea will need to help its firms diversify wherever possible to help build resilience to new economic shocks.

Q. What strategic significance would CPTPP membership have for Korea as U.S. trade policy is being reshaped? In particular, what benefits could it offer in providing alternative trade pathways with countries such as Japan and Mexico, with which Korea does not have bilateral FTAs, and in shaping Korean companies’ supply-chain and overseas investment strategies?

A. Getting into the CPTPP is the single most urgent task for Korea’s future economic growth. A world of increasing fragmentation is a major challenge for globally exposed markets like Korea. Joining the CPTPP provides greater certainty and lowered risk for Korean operations in the future. Bilateral trade agreements are no substitute for bigger arrangements, as bilateral FTAs are too difficult for most firms to use. The benefits on offer are too small and the costs of following the rules in multiple bilateral FTAs are too high. The CPTPP is poised to be a critical piece of economic infrastructure in the future. Korea cannot afford to be on the outside of this platform.

Q. Relations with the U.S. and trade conditions vary considerably among Asia’s export-oriented economies. What are Korea’s relative strengths and vulnerabilities compared with regional competitors such as Japan, Taiwan, and Singapore?

A. I’m not certain this is the right way to look at this issue. Korean firms have proven themselves to be fiercely competitive, even when set against other companies in the same sectors. The better question is how Korea can ensure that its firms have the best options for engaging in competitions relative to others. For example, Japan and Singapore are already in the CPTPP while Korea is not. All three are part of RCEP while Taiwan is not. These arrangements provide valuable market opportunities that can be exploited and give an advantage of participants that non-members do not receive. Of course, as critical as trade deals are to future competitiveness, they are not the only part of the story. Korea will need to continuously upgrade business conditions domestically to ensure that its firms are as well equipped as possible to manage competition.