Coping with the trade warThe trade war between the United States and China is heading into uncharted territory. Despite some hopes for a letup, U.S. President Donald Trump’s administration has kicked off a procedure aimed at imposing tariffs on Chinese imports worth $200 billion. Uncle Sam’s attack is basically on the Made in China 2025 initiative of Chinese President Xi Jinping, which aims to make his country a top manufacturer to rival the U.S. by the year 2025. If it goes through with that step, the Trump administration will have put additional tariffs on a whopping $250 billion worth of imports.
The problem is that the trade war will most likely continue despite our fervent hopes for a ceasefire, or a scaling back of hostilities. Even though criticisms of Trump’s belligerent trade policy are growing fast in the United States and around the world, he simply does not care. Instead, he is threatening to impose additional tariffs on nearly all imports from China unless Beijing surrenders to Washington. In response, China has warned that it will retaliate against America on the same level as soon as possible. We are deeply concerned about the two economic powerhouses’ contest to gain the upper hand in setting a new global trade order for the 21st century.
The likelihood of the hegemonic battle between a superpower and its new rival not subsiding soon is ringing loud alarm bells over the future of the global economy as a whole. Ours will certainly be affected as well. If protectionism spreads around the word, global trade is expected to decline by 4 percent, and the world GDP will dwindle by 1.4 percent within one to two years. In that case, the Korean economy, which is so heavily reliant on exports, cannot help but suffer greater damage than any other country, particularly given the fact that its trade to China and the United States accounts for nearly 40 percent of all its exports.
Nevertheless, the Moon Jae-in administration seems sanguine. Paik Un-gyu, minister of trade, industry and energy, said, “The trade war between the two countries will have limited impact on our economy,” while Kim Hyun-chong, a minister in charge of trade negotiations with other countries, said, “Let’s wait and see if the Sino-U.S. trade battle has already reached the level of war or not.” The trade ministry and the finance ministry plan to hold another joint meeting today to cope with the trade war, but it is not a high-level meeting. Financial markets are already fluctuating by big margins. The government must come up with a contingency plan to brace for a worst-case scenario.
JoongAng Ilbo, July 13, Page 30