April 27, 2024

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[THE INVESTOR] With Donald Trump swearing in as the 45th US president Friday, experts said Sunday that his protectionism-led, “America-first” policies would have a negative impact on South Korea’s economy as well as the global economy.

“With global trade stagnating, some countries are attempting to maintain their portion of global trade with protectionism,” said Chung Chul, vice president of the Korea Institute for International Economic Policy. “In the short term, it may appear that protectionism will benefit the US economy, but in the long term, it would hurt everyone, further shrinking the sluggish global economy.” 

The White House website lists the policies of the Trump administration including its goal to create 25 million jobs and an annual growth target of 4 percent. It also includes plans to renegotiate the North American Free Trade Agreement, or NAFTA, and pull out of the Trans-Pacific Partnership, showing its willingness to step back from free trade.

In addition to the NAFTA, economists warn the US might want to renegotiate other trade deals that it considers unfair and will take a tough stance on countries that have trade surplus with the US.

If so, Trump’s protectionism would hit South Korea, China and Japan the worst, considering their trade surplus with the US and a deeply intertwined regional supply chain, according to a recent report by investment firm Morgan Stanley.

“The Trump administration might demand renegotiation of the free trade agreement with Korea or raise South Korea’s portion of defense cost-sharing,” said Kim Jung-sik, an economics professor at Yonsei University.

There is a slight possibility Trump might ease his tough stance on trade after talking to other countries, but protectionism is likely to be the approach of the Trump’s administration, an increasing number of analysts said.

“The primary targets of the US trade policy appear to be China and Mexico, but considering South Korea’s heavy reliance on exports, it would be also affected (by protectionism),” Chung said.

While analysts said Trump’s policies still lack details, Trump’s nominees for his core economic advisers dropped some hints at their confirmation hearings last week.

US Commerce Secretary nominee Wilbur Ross said he was “very, very concerned” about China’s growing semiconductor sector. Meanwhile, US Treasury Secretary nominee Steven Mnuchin said he is willing to name China a currency manipulator, if warranted.

If the US labels China a currency manipulator -- which would mean the US needs to ease its existing standards or make new ones -- South Korea is likely to fall into the category as well, according to research by the Korea Institute for International Economy earlier this month.

By Park Ga-young/ The Korea Herald (gypark@heradcorp.com)