Trump's Reciprocal Tariff Announcement and Market Reaction Analysis

What is a Reciprocal Tariff?

A new concept announced by Trump, it's a policy to impose the same level of tariffs that a foreign country levies on the United States.
The goal is to reduce the U.S. trade deficit and protect domestic manufacturing in the United States.

Recent Tariff Measures and Market Reaction

Deep Seek issue occurred 2 weeks ago → Temporary stock market decline
Tariff imposition announcement on 3 countries (Canada, Mexico, China) last week → Market declines again
Subsequently, announcement of tariff suspension for Canada and Mexico → Market rebound
Announcement of reciprocal tariffs this week → Market volatility increases again

Trump's pattern:

Strong announcement → Market shock → Provides room for negotiation → Suspension or withdrawal.
Takes a hard-line stance, arguing that "the United States has suffered in trade."
Effectively uses it as a bargaining chip.

Trump's Tariff Strategy and Responding Countries

1. Japan

Japanese Prime Minister quickly visited the United States for a summit.
Announced increased purchases of U.S. weapons, additional imports of U.S. gas (LNG), and additional investments in the United States.
Trump responded positively, emphasizing that "The United States and Japan are strong allies."

2. European Union (EU)

Discussing adjustments to automobile tariffs with the United States.
Mentioned the possibility of reducing automobile tariffs from 10% → 2.5%.
Increased purchases of U.S. weapons and energy.

3. South Korea

No official response yet, but Trump and U.S. officials consistently point out additional gas purchases and automobile trade imbalances.
The U.S. position is that "If South Korea buys more U.S. gas, the trade deficit will be resolved."

Market Reaction and Affected Stocks

1. Tariff Victim Stocks (Weak)

Companies directly affected by tariffs
- Apple (high dependence on China)
- Tesla (affected by the U.S.-China trade war)
- Companies affected by the global supply chain, such as automobiles and smartphones

2. Tariff Haven Stocks (Strong)

Software and cloud companies
- Meta (Facebook), Palantir, Netflix, Spotify, etc. (little tariff impact due to no physical products)
Cybersecurity companies
- CrowdStrike, Palo Alto Networks, etc.
Finance and domestic demand related companies
- JPMorgan Chase, Goldman Sachs, Walmart, Costco, etc.
Defense and energy companies
- U.S. defense-related companies (Lockheed Martin, Northrop Grumman, etc.)
- LNG-related companies (Chevron, ExxonMobil, etc.)

Impact on AI and Semiconductor Industries

Stargate Alliance (SoftBank-OpenAI alliance)
- Expansion of AI investment → Increased demand for data centers and electricity.
- Power companies (Vistra, Constellation) and nuclear power-related stocks are strong.

Future Market Outlook and Investment Strategy

Tariffs are noise and are likely to be resolved in the long term.
Short-term corrections can be used as opportunities for bargain buying.
AI, cloud, defense, and finance stocks need to be continuously monitored.
Volatility may be high from mid-February to mid-March → Recommended dollar-cost averaging strategy.

< Summary >

Trump announced reciprocal tariffs, increasing market volatility.
Japan and Europe are responding quickly and pursuing negotiations with the United States.
South Korea is also likely to be pressured in the automotive and energy sectors.
Automobile and smartphone companies (Apple, Tesla, etc.) affected by tariffs are underperforming.
Software, finance, defense, and energy companies are strong.
Increased AI-related investment is drawing attention to data center and electricity-related companies.
Tariff issues are likely to be temporary noise, and a rebound is highly likely in the long term.

[More…]

Analysis of the impact of Trump's tariff policy → https://nextgeninsight.net/?s=%ED%8A%B8%EB%9F%BC%ED%94%84
Trends in the AI and data center industries → https://nextgeninsight.net/?s=AI

*YouTube Source: [소수몽키]

– 이번엔 상호관세? 예측불허 트럼프 정책의 수혜주와 피해주들

Analysis of President Trump's 25% Tariff on Steel and Aluminum and Its Impact on the Korean Steel Industry

1. Background of Trump's Tariff Imposition on Steel and Aluminum

Former President Trump announced that he would impose an additional 25% tariff on all steel and aluminum products starting on the 10th.
This measure is similar to the first steel tariff imposed in 2018 and is seen as a measure to protect the domestic steel industry in the United States and block the circumvention of imports of Chinese steel.

In 2018, Korea was subject to a steel export quota through negotiations with the United States, and was exempt from tariffs while maintaining a certain export volume.
However, this time, all countries, including Korea, have chosen to uniformly apply a 25% tariff.

The reasons for Trump's decision are as follows:

Protection of the U.S. Steel Industry
- The United States produces about 80 million tons of steel annually, but its consumption is 100 million tons
- Domestic production accounts for about 75%, and the remaining 25% is covered by imports
- If Chinese steel flows in, the U.S. steel industry could collapse
- The Biden administration has strengthened regulations, limiting Chinese steel imports, but there is still the possibility of circumvention exports
Blocking Circumvention Exports of Chinese Steel
- Korea, Canada, Mexico, and Brazil are suspected of being countries that circumvent exports of Chinese steel
- As a result, Korea is also likely to be included in the 25% tariff

2. U.S. Steel Market Structure and Tariff Impact

The United States makes heavy use of steel scrap recycling and generally produces steel through the electric arc furnace method.
On the other hand, China produces more than 1 billion tons per year and is likely to switch to exports in the event of an economic downturn.

The following is a prediction of the impact of this tariff on the steel market in the United States.

Possibility of Rising Steel Prices in the U.S.
- If imported steel is subject to a 25% tariff, the overall market price will rise
- However, it is difficult for the tariff to be 100% reflected in the price
- Expected price increase rate: within 10% of the overall average
Deterioration of Price Competitiveness of Korean Steel Companies
- Korean steel companies such as POSCO and Hyundai Steel will suffer from a deterioration in price competitiveness in the U.S. market due to tariff burdens
- It is difficult to maintain the selling price, and a price cut of up to 20% is necessary
- Additional pressure for cost reduction occurs

3. Economic Impact on Korean Steel Companies

Analyzing the economic impact on Korean steel companies, the following results can be expected:

POSCO
- 2023 Operating Profit: 2.2 trillion won
- U.S. Export Ratio: 15%
- Estimated loss when a 20% price cut occurs: 2.9 trillion won
- Increased possibility of turning to a loss
Hyundai Steel
- Operating Profit: 314.4 billion won
- U.S. Export Ratio: 5%
- Estimated loss when a 20% price cut occurs: 290 billion won
- Operating profit margin could fall to 0.1%

As a result, POSCO, which has a high export ratio, is highly likely to turn to a loss, and Hyundai Steel is also expected to see a significant deterioration in profitability.

4. Trump's Intentions for Tariff Policy

The goal that Trump wants to achieve through the imposition of steel tariffs is not just to secure tax revenue, but seems to be a strategic judgment to foster the U.S. manufacturing and defense industries.

Whether to Secure Tax Revenue
- About 5 trillion won in tax revenue can be secured annually through tariffs
- However, the U.S. fiscal deficit is 18 trillion dollars, so there is no significant impact
Manufacturing Protection and Inducement of Economic Slowdown
- At the time of the first steel tariff in 2018, 75,000 manufacturing jobs were lost in the U.S.
- An increase of 1 steel worker leads to a decrease of 3 manufacturing workers
- Rising steel prices increase the burden on manufacturing industries such as automobiles and construction
- Ultimately, the possibility of an economic recession in the United States increases
Maintaining Manufacturing Competitiveness in the Long Term

U.S. steel production is low at less than 100 million tons
If it falls behind in competition with China, it will have a negative impact on the defense industry in the future
In the event of war, the amount of domestic steel production becomes important
It is likely to be a strategic measure to maintain the steel industry

5. Future Outlook and Investment Strategy

Whether to Invest in U.S. Steel Companies
- Steel prices soared in 2022 ($1,800/ton → currently half the level)
- Decrease in profits of U.S. steel companies (Nucor, U.S. Steel, etc.)
- Even if steel prices rise in the short term, it is unlikely that there will be long-term growth due to the economic slowdown
Korean Steel Industry Response Plan
- Companies with a large proportion of exports to the U.S. need to seek alternative markets
- Investment in local factories and conversion of production methods are necessary (diversification of supply chains to Vietnam, India, etc.)
- A strategy to minimize the impact by flexibly adjusting price policies is needed
Expected U.S. Economic Impact

The possibility of an economic slowdown is higher than that of economic stimulus
Increased manufacturing cost burden → reduced production → reduced employment → consumption slump
As a result, the possibility of interest rate cuts will increase

The Korean steel industry will be a heavy burden in the short term,
If a recession comes, however, U.S. companies may also be significantly affected in the long term due to falling steel prices.
Trump's policies have a short-term impact on domestic steel companies,
In the long term, however, there is a possibility of a backlash in which the manufacturing industry is hit hard.

< Summary >

Trump announces 25% tariff on steel and aluminum → Concerns about the impact on the steel industry
Korea was exempt from tariffs with a quota system during the first tariff in 2018 → This time, 25% is imposed on all countries
Intention to protect the U.S. steel industry and block Chinese circumvention exports
POSCO and Hyundai Steel of Korean steel companies are expected to be hit by sales (possibility of POSCO deficit)
Rising steel prices → Increased manufacturing costs in the U.S. → Possibility of economic slowdown
Korean companies need to diversify exports and adjust prices

[More…]

Trump's Steel Tariff Announcement and Outlook for the Korean Steel Industry
https://nextgeninsight.net/?s=%EC%B2%A0%EA%B0%95
Analysis of the U.S. Economic Slowdown and the Impact on the Global Economy
https://nextgeninsight.net/?s=%EB%AF%B8%EA%B5%AD

*YouTube Source: [Jun’s economy lab]

– What would happen to Korea if the steel tariff were 25%?

Growth Strategy for Aerospace Manufacturing Through Digital Innovation

Key Challenges in Aerospace Manufacturing

The aerospace industry requires a complex regulatory environment and precise manufacturing technology. In particular,

Compliance with Regulatory and Legal Requirements: Strict quality and safety standards required by governments and customers
Complex Supply Chain Management: Collaboration with multiple suppliers and verification of raw material quality are essential
Need for Digital Technology Adoption: Utilizing various IT technologies for efficient production and supply chain optimization

Characteristics of Aerospace Manufacturing

1. Multi-layered Regulations

Aerospace manufacturing is an industry subject to multiple layers of government and customer requirements.

Example: Compliance with numerous standards required when delivering contracts for the U.S. Department of Defense (DoD) and NASA
Manufacturers must comply with standards such as quality certification (e.g., AS9100) and are subject to continuous audits

2. Complexity of the Supply Chain

In the "Aerospace Supply Chain," a multi-stage supply chain is formed from raw materials to final assembly.

Even simple metal parts must undergo rigorous verification, especially strength, durability, and alloy composition are reviewed
For example, parts manufactured in the United States are more likely to undergo more rigorous testing than parts manufactured in China

3. Is Administrative Work More Difficult Than Manufacturing?

Some companies say, "Manufacturing itself is easy in the aerospace industry, but management is difficult."
In practice, documentation and procedure compliance are key elements and take a lot of time

Digital Transformation Strategy

Leveraging advanced technologies and automation tools can reduce inefficient processes and increase competitiveness.

1. Introduction of Smart ERP System

Relying on manpower-dependent quotation systems using existing Excel spreadsheets is risky
ERP (Enterprise Resource Planning) system enables data-driven decision-making and automation
Example: Introducing ERP with automatic quotation generation function enables continuous quotation work even when key personnel are absent

2. Strengthening Supply Chain Visibility

Collect data and monitor in real time throughout the supply chain
IoT sensors and blockchain can be used to guarantee and track raw material quality
Example: Blockchain can be used to verify the origin and manufacturing history of aircraft parts

3. Utilizing Artificial Intelligence (AI)-Based Analysis Tools

Applying AI to optimize customer order patterns and production schedules
Machine learning-based predictive analytics can detect supply chain risks early

4. Strengthening Cybersecurity

Defense and aerospace companies are often exposed to cybersecurity risks
Cloud-based security solutions and multi-layer authentication systems are needed to protect information

Conclusion and Summary

Aerospace manufacturing is an industry with a strong regulatory environment and a complex supply chain.
Companies can enhance quotation competitiveness and maximize growth potential through introduction of ERP system, utilization of AI, and strengthening supply chain visibility.

< Summary >

Aerospace manufacturing is in a multi-regulatory and complex supply chain environment.
It is difficult to maintain competitiveness without digital innovation.
Introduction of smart ERP system and utilization of AI are essential.
Supply chain transparency can be strengthened through blockchain and IoT sensors.
A strong cybersecurity solution is required.