Not the time to experiment

The tit-for-tat trade war between the world’s two largest economies escalated to a new level after U.S. President Donald Trump ordered 10 percent tariffs on $200 billion worth Chinese goods. The tariffs will be upped to 25 percent beginning next year. Beijing responded that it has “no choice” but to retaliate. It is expected to act out its earlier threat of slapping tariffs on $60 billion worth of American goods. Washington won’t likely back down. It plans to levy additional tariffs on Chinese goods worth $267 billion, which could cover almost all of imports from China, if Beijing retaliates. The game of chicken is bound to go on until one of them gives in.

The widening showdown between the two casts a dark cloud over the recovering global economy. According to Reuters, an increase of tariff-slapped imports by $100 billion reduces global commerce by 0.5 percent and economic growth rate by 0.1 percentage point. The growing trade conflict and protectionism has sparked fears of a global crisis recurring every 10 years.

Financial instability from emerging economies of Turkey, Argentina, India and Indonesia is another concern. The ominous developments on the global trade front bode badly for the export-reliant Korean economy. The economy with fragile domestic demand could rapidly shrivel if its mainstay exports of semiconductors, automobile, steel and petrochemicals are shaken.

The Korean economy is sluggish with no signs of relief on the worsening job front due to fallout from the government’s income-led growth policy. External dangers are looming over the economy, which is already suffering from internal problems. Yet the government does not seem to sense the gravity of the situation.

The government must place itself at a vigilant posture based on the worst case scenario. While ensuring defense of the frontiers from external shocks, it must work on ways to hone the competitiveness of Korea Inc. through deregulation and flexibility in the labor market. This is no time for the government to experiment with its inward growth policy.

JoongAng Ilbo, Sept. 19, Page 30