US Tariff War: Why Did It Start, and What Impact Will It Have?

Background of the Tariff War

US Intent to Resolve Trade Deficit
- The US has been experiencing a persistent trade deficit since the early 2000s, with over half originating from trade with China.
- Tariffs were introduced as a measure to reduce reliance on Chinese products and balance the trade.
Economic Pressure on China
- Continued economic sanctions against China since the Trump administration.
- Aimed to induce US companies to withdraw from China, also affecting companies that had chosen Canada and Mexico as manufacturing bases.
USMCA Agreement and Pressure on North American Economy

Utilizing the US-Mexico-Canada Agreement (USMCA) to restrict circumvention of tariffs on Chinese goods.
The export structure to the US via Mexico and Canada is being forced to change due to tariffs.

Economic Intent and Strategy of the Tariff War

Reorganization of Supply Chains Centered on the US
- Pressuring companies manufacturing in China, Mexico, and Canada to increase production facilities within the US.
- Using tariffs to increase production costs overseas → inducing reinvestment in the US economy.
Disruption of Global Value Chains
- Reducing existing global supply chains (GVC) and transitioning to a US-centered UVC.
- Utilizing non-tariff barriers like the IRA (Inflation Reduction Act) and CHIP Act, in addition to tariffs.
Immediate Retaliation from Other Countries

Major trading partners like China, Mexico, and Canada are also considering retaliatory tariffs and measures.
Countermeasures similar to the US-China trade war are expected.

Impact by Major Countries and Industries

Canada and Mexico
- The two countries, highly reliant on exports to the US, face immediate economic impact.
- Potential reduction in reliance on local factories and increased production within the US.
China
- Decrease in US exports, attempts to secure alternative markets, and potential for retaliatory tariffs.
- Increased possibility of foreign companies leaving Chinese manufacturing bases for other regions.
Korea

Korea's reliance on exports of intermediate goods to China: approximately 80% of trade with China.
Expected disruption of circumvention export structure due to the conflict between the US and China.

Global Economy
- Reduction in global trade volume and strengthening of protectionism.
- Worsening low-growth trend due to a reduction in trade as a percentage of global GDP.

Long-Term Ripple Effects of the Tariff War

Industry-Specific Changes
- Increased production in the US in major manufacturing sectors like home appliances, automotive parts, and batteries.
- Potential for the sale of manufacturing facilities in Canada and Mexico at bargain prices.
Changes in Global Market Structure
- Possible slowdown in inflation: impact of weakened demand and global economic slowdown.
- Increase in investment reduction and economic uncertainty.
Political Factors

Acceleration of retaliatory measures by various countries due to national pride and political pressure.

Economic Effects within the US
- Anticipated increase in US employment and production.
- However, the potential for higher prices on imported goods due to tariffs is a concern.

< Summary >

The US has started imposing tariffs on China, Mexico, and Canada to resolve its trade deficit and reorganize global supply chains.
Countries are preparing retaliatory measures in response to the US tariffs.
Worldwide trade reduction and economic growth slowdown are anticipated, with countries heavily reliant on trade, like Korea, likely to be severely impacted.
The tariff war may be positive for the US economy in the short term, but an acceleration of low global economic growth is inevitable.

[More…]

The Impact of the US-China Trade War on Korea
https://nextgeninsight.net/?s=%EB%AF%B8%EC%A4%91
The Collapse of Global Supply Chains and Finding Alternatives
https://nextgeninsight.net/?s=%EA%B3%B5%EA%B8%89%EB%A7%9D

*YouTube Source: [경제 읽어주는 남자(김광석TV)]

– [속보] 캐나다·멕시코·중국 즉각 보복에 나섰다. 본격화된 관세전쟁이 미칠 경제적 파장은? [즉시분석]

South Korea's Population Decline and the Future – Changes in Economy, Industry, and Jobs

Impact of Population Decline on the South Korean Economy

1. Decline in the Youth Population and Its Aftermath

Rapid decrease in the youth population between the 2000s and 2010s.
Disappearance of consumption trends targeting the youth, such as fountain pens, education-related gifts, and adolescent books.
Consequently, a decline in South Korea's youth content market. Examples include: teen dramas, youth books, and cosmetics for teens.

2. Sustainability of the Korean Wave (Hallyu) Boom

The Korean Wave has expanded globally based on regional markets.
Weakening domestic demand directly affects the sustainability of the Hallyu boom.
As seen in the Hong Kong case, weakening the foundation for domestic creative work reduces global influence.

3. Industrial Changes

Structural changes in manufacturing and cultural industries due to decreased consumption of goods targeting specific age groups.
Regional integrated markets (e.g., the China-Japan-Korea market) are emerging as important alternatives.
Planning and creative content that capture global trends are becoming crucial.

4. Government and Corporate Response Strategies

Due to population decline, maintaining and ensuring the efficiency of the public sector and basic services (electricity, healthcare, etc.) is essential.
The need for alternative labor using AI and automation technologies is increasing. However, professions that cannot be replaced by AI (architecture, creative planning, etc.) will become more important.

Crisis in the Birth Rate and Countermeasures

1. Problems

Economic growth slowdown and increased tax burden due to persistent low birth rates.
If there is no breakthrough, concerns about the sustainability of the South Korean economy within the next 10 years.

2. Solutions

Introduce policies to increase the birth rate by expanding regional autonomy.
Implement direct support policies such as support for children's education.
Develop autonomous strategies by strengthening regional budgetary and authority powers.

The Four-Day Workweek and the Future Job Market

1. Impact of Population Decline on Work Culture

As the workforce shrinks, companies will treat employees more favorably.
There's a trend among private companies to focus on employee welfare by introducing a four-day workweek.

The tax burden on young people increases due to the aging population.
However, population decline also provides an opportunity for reduced job competition for the younger generation.

3. Global Competition and Domestic Labor Treatment

Countries around the world are intensifying competition to attract highly skilled workers in response to population decline.
Flexible work arrangements and welfare within companies will increasingly become key competitive advantages.

Globalized Markets and Cultural Development

1. Diversification of Goods and Content

Shift away from consumption trends centered on teenagers towards streamlined products for 20-30 year-olds.
Integration strategies for the East Asian market, transcending population size, are essential.

2. The Need for Cooperative Regionalization

Like Europe, countries with small territories can expand by forming unified markets.
Potential for collaboration in content or fields like cosmetics/fashion between South Korea, China, and Japan.

Summary

South Korea's population problem signals significant changes in the economy, industry, employment, and culture. In situations such as the decline in the youth consumer base, weakening of the Korean Wave boom, and AI-led changes in employment, governments and companies must implement policies that increase birth rates and strengthen regional autonomy. Additionally, a new employment paradigm that values the workforce, such as forming regional union markets and introducing a four-day workweek, is needed.

[More…]

Crisis in the Birth Rate and Countermeasures: https://nextgeninsight.net/?s=%EC%B6%9C%EC%82%B0%EC%9C%A8
Changes in AI and the Labor Market: https://nextgeninsight.net/?s=AI

*YouTube Source: [Jun’s economy lab]

– 한국의 미래는 없습니다.(ft. 우석훈 작가 2부)

Major Stock Market Trends and Investment Strategies from 2018 to the Present

1. Key Events and Trends in the 2018 Stock Market

1-1. January 2018: KOSPI Records All-Time High

Date: January 29, 2018
KOSPI recorded an all-time high of 2,598 points.
This hinted at a brilliant start to 2018, but was followed by a continuous downward trend.

1-2. March 2018: Interest Rate Hikes and Tariff Shocks

March 22nd: The U.S. Federal Open Market Committee (FOMC) raised interest rates by 25bp.
March 23rd: President Trump signed an executive order imposing tariffs on China, marking the beginning of the U.S.-China trade conflict.
The FOMC raised interest rates four times throughout 2018, putting pressure on the market.

1-3. April 2018: Inter-Korean Summit

April 27th: Inter-Korean summit held.
Stocks related to North Korea, such as Hyundai Rotem, rose, but the actual long-term impact was limited.

1-4. August 2018: Emerging Market Crisis

August 13th: A crisis occurred in emerging countries, including Turkey, due to a strong dollar.
This was due to pressure from tariff shocks and interest rate hikes.

2. Market Lessons and Implications from 2018

2-1. Impact of Tariffs and Interest Rate Hikes on the Domestic Stock Market

KOSPI continued to decline throughout 2018 and did not recover its annual high.
- The main reasons were tariff impositions, a strong dollar, and a downturn focused on semiconductors.

2-2. Changes in the Global Economic Structure

In 2018, the Nasdaq and S&P 500 continued to rise in the U.S.
Main cause: Acceleration of digital transformation.
- Major tech companies (FAANG) such as Amazon, Google, and Netflix grew rapidly, driving the transition to a digital economy.
- The main driving force was the AI and software-centered change.

2-3. Impact of FOMC's Monetary Policy

The interest rate hike (September FOMC meeting) acted as a trigger for the market decline.
However, the market stabilized again in December when it was stated that the pace of interest rate hikes would be slowed.

3. Current Implications and Investment Strategies

3-1. Perspective on Investing in the Domestic Stock Market

Must invest in companies with a clear competitive advantage.
- Recommend market-dominant companies in industries such as shipbuilding and semiconductors that can pass on tariff and exchange rate pressures.

3-2. Global Market and AI Trends

Currently, AI and digitization are driving significant changes in the economic structure, showing continuous growth.
Need to focus on AI-related companies or global technology companies leading this change.

3-3. Need to Monitor the Latest FOMC Interest Rate Policy

Chairman Powell has actively revised the 2% inflation target.
The possibility of interest rate cuts and changes in tariffs are key variables to watch.

< Summary >

Major Stock Trends in 2018:
KOSPI showed an annual decline due to interest rate hikes, tariff shocks, and the emerging market crisis.
Global Differences:
The U.S. market continued to dominate the upward trend due to the digital transformation trend.
Investment Strategy:

Recommend investing in global AI companies and competitive domestic small to medium-sized companies that can reflect tariffs and interest rates.

[More…]

*YouTube Source: [이효석아카데미]

– [그냥효] 트럼프발 관세폭탄!! 폭락한 주식시장! 위기를 헤쳐나가는 ‘방법’

1. Major Countries with FTA with the U.S.

The major economic powers that currently benefit from tariff advantages due to having Free Trade Agreements (FTAs) with the United States are as follows:

Canada
Mexico
South Korea
Japan
Singapore
Australia
United Kingdom
Chile

Among these, Canada and Mexico have faced sanctions and been included in tariff lists amidst the protectionist trade policies of the recent Trump administration. This can be seen as a measure to block potential circumvention of trade with China. Now, the main country with significant tariff benefits remaining is 'South Korea.'

2. U.S. Investigation into China's Third-Country Circumvention Exports in 2022 and Why South Korea Was Named as a Transit Point

In 2022, the United States strongly investigated the issue of China's circumvention exports, which was the largest investigation of its kind to date.

The U.S. first named South Korea as a "transit point" for China's circumvention exports.
As a result, South Korea has been placed on the list of potential countries subject to the U.S. General Tariff.
If subject to the general tariff, South Korea would face additional export tariff burdens in major industries, such as steel and semiconductors, which could likely lead to economic damage.

Lesson: It's necessary to warn that, during the protectionist trade policies of the Trump administration, South Korea must never become a 'country that opposes the U.S.' South Korea, which has a high trade volume with the U.S., is in an especially sensitive situation.

3. Key Situation: Trump’s General Tariff Policy and Target Countries

The U.S. is attempting to put export pressure on China and other major manufacturing countries using the General Tariff (GT).

Initial Examples of Target Countries:
Mexico and Canada -> Recently imposed 25% tariffs, respectively.
Germany, Japan, South Korea, Taiwan, Vietnam -> Next major target candidates.
Characteristics of General Tariff Policy:
Gradually increases tariff rates to apply pressure to the optimal point.
Even if a country wasn't an initial target, it can affect countries supplying similar products.

Conclusion:
There is a high possibility that South Korea could also become a 'target country,' and it is necessary to prevent this and maintain a balanced trade relationship.

4. South Korea's Economic Cards: Reasons Why the U.S. Might Prefer It

South Korea can establish itself as a strategic economic country that can replace China within the current global supply chain.

Strong Industry Sectors:

Semiconductor Industry
- South Korea, possessing the world's most advanced semiconductor manufacturing technology, can be an essential partner for the U.S. digital economy.
Secondary Battery (Battery) Manufacturing
- With the expansion of the electric vehicle market, the demand for secondary batteries is rapidly increasing, and South Korea has global leading companies in this field.
Shipbuilding, Steel, and Automotive
- Ship, steel material, and automobile manufacturing technologies are recognized for their competitiveness not only in China but also globally.
Home Appliance Industry
- Major South Korean brands with global market share have a high-quality image.

The U.S. needs a reliable alternative to China with a stable supply. In this regard, South Korea is seen as a “country that cannot be abandoned if China is abandoned,” and to maintain this, South Korea must strategically manage its friendly relationship with the U.S.

5. South Korea's Response Strategies

Utilizing FTA Benefits
- South Korea already has an FTA with the U.S. and receives tariff benefits in major industries. It should utilize this to build a more advantageous position.
Expanding Diplomatic Efforts
- Emphasize strategic cooperation in discussions with the Trump administration and the U.S. political sphere.
- In particular, remind them of promises to address trade imbalances and cooperation in key industries.
Adjusting Relationship with China

- Develop a strategy to demonstrate South Korea’s transparent position on the ‘China circumvention export controversy’ that the U.S. is closely monitoring.

Continuous Development of U.S.-Dependent Industries
- Continuously pursue technological enhancements in areas favored by the U.S. such as semiconductors, secondary batteries, and steel products.
- Use this as a card to emphasize South Korea's importance in decoupling situations.

< Summary >

The U.S. is expanding pressure by designating South Korea as a transit country, following Canada and Mexico, due to its protectionist trade policies.
South Korea has the potential to become a replacement for China with its strong industries such as semiconductors, secondary batteries, and shipbuilding.
Through strategic negotiations and maintaining a friendly economic relationship with the U.S., South Korea needs to cope with the crisis.

[More…]

*YouTube Source: [Jun’s economy lab]

– 트럼프는 천재다, 진짜 관세 목적