Troy Stangarone is the senior director of congressional affairs and trade at the Korea Economic Institute.
New America's trade policy
When Joe Biden launched his presidential campaign in 2020, he suggested that history would look back on Donald Trump as an aberration in U.S. politics. With his victory last week, Trump has demonstrated that he not only remains a force in American politics but has effectively changed the policy debate in the United States.
Trump's impact on policy was evident within Biden's own administration. Rather than revert to the post-World War II consensus on free trade, the Biden administration kept in place the Trump tariffs on China and only made partial attempts to relieve the national security tariffs on steel and aluminum. In the case of Korea, they never made an attempt to provide any relief.
In terms of new trade initiatives, the Indo-Pacific Framework was supposed to address future-oriented issues such as climate change and supply chains but offered no new market access to U.S. trade partners. The new contours of trade had been set by the Trump administration, the U.S. market was too open and additional tariff relief was not something that would be on the table.
In his new term in office, Trump is essentially offering domestic and foreign businesses a deal. In exchange for moving manufacturing back to the United States to compensate for high tariffs, they will get a lower corporate tax rate and looser regulations.
The key component in this plan is higher tariffs. In an op-ed just prior to the election, former U.S. Trade Representative Robert Lighthizer essentially laid out three options for addressing the harms the Trump team believes trade has inflicted on the U.S. economy: to create export and import licenses for trade, to add a tax to purchasing U.S. assets and tariffs. Since tariffs worked during the first Trump administration, that is the preference, especially as tariffs are Trump's personal preference.
More worrying for Korea and other countries is that Lighthizer views countries with trade surpluses with the United States as "protectionists" and the United States as a "victim." Through September of this year, Korea's trade surplus was $50.4 billion, well on its way to surpassing last year's surplus and more than double Korea's $27.6 billion trade surplus with the United States when Trump first came to office.
To achieve his objectives, Trump has promised to impose a universal tariff on U.S. imports. While he has suggested this could be 10 percent, 20 percent, or some other figure, the goal will be to eliminate the U.S. trade deficit and boost domestic manufacturing.
Questions of whether Trump is serious or able to do what he has proposed are essentially irrelevant. While Trump is often perceived as unpredictable, he has long been consistent about his distaste for U.S. trade deficits and his love of tariffs. Even if the goal is only to provide negotiating leverage for the United States, the expectation should be that Trump will follow through on some of these tariff promises.
Trump's legal ability to follow through on his tariff threats should not be underestimated. His team has had four years to consider what steps they would take. The universal tariff proposal would be a replay of Nixon's prior tactics to use the president's authority to declare a national emergency. While there would be lawsuits to stop Trump's tariff, U.S. courts have a history of showing deference on national security issues. In Nixon's case, he won all of the lawsuits.
Another path would be the Tariff Act of 1930. Section 338 of this law gives the president the authority to impose a new or additional tariff if they determine a country "Discriminates in fact against the commerce of the United States." Lighthizer has mentioned this possibility previously and seems to be hinting at it in his pre-election op-ed.
Even a more targeted approach would impact Korea. Trump has proposed to raise tariffs further on China, on auto imports from Mexico and in other cases. This could impact parts produced in China or Mexico for Korean production in the United States.
On the Inflation Reduction Act, Trump's promise to end the law is complicated by his own authority, concerns by Congressional Republicans that a repeal could undermine existing investments in their districts, and what he owes Elon Musk for his support. This suggests reform rather than complete repeal of the law but also more change.
While the focus will be on these issues and others that directly impact Korea, the biggest takeaway from this election is that the era of the United States pursuing freer trade and deeper economic integration abroad is over. Given the chance to reverse Trump's policies, the Biden administration kept them in place. How long this period will last is unclear, but what is clear is that Trump has reset the terms of debate on trade for the foreseeable future.
Troy Stangarone is the director of the Hyundai Motor-Korea Foundation Center for Korean History and Public Policy and the deputy director of the Indo-Pacific Program at the Woodrow Wilson Center.