Gov’t, businesses should join forces to overcome trade battle

Answering to the question if there is the potential for a trade war with China in an interview with Reuters Wednesday (local time), U.S. President Donald Trump indicated that he is willing to stage a trade war with China, by saying, “I don’t think so, I hope not. But if there is, there is.” Trump also signaled that the United States is preparing to impose tough trade sanctions against South Korea, by saying, “South Korea is dumping washing machines into the United States, destroying what was once a good job-producing business.” It is expected that the U.S. International Trade Commission’s recommendation made in November last year to initiate safeguards on imported washing machines by Samsung Electronics and LG Electronics will be implemented early next month.

The recommendation includes an option to impose a maximum of 50 percent tariff on imported washing machines that exceed a quota of 1.2 million units for duration of three years. Therefore, if the sanctions are imposed, Samsung Electronics and LG Electronics would lose half of their revenues coming from the 1.08 million units that are covered by the safeguard measures. President Trump’s remark is supporting the arguments made by hardliners such as United States Trade Representative (USTR) Robert Lighthizer. He is arguing that the United States should apply Section 232 of the Trade Expansion Act to Korea. This Section is about imposing restrictions on imports for reasons of national security, which can deal a blow to aluminum and steel exporters including Korea. Furthermore, bumpy road is expected for Korea as the renegotiation of the Korea-U.S. Free Trade Agreement, which includes additional opening of the agricultural industry and increasing tariffs on automobiles, has started.

The trade imbalance issues raised by U.S. trade authorities are in response to complaints made by U.S. companies. The Korean government should also join forces with domestic companies to respond to retaliatory measures by the U.S. government. In order to deal with unfair demands by the United States, the Korean government and domestic companies should consider tough measures including filing a petition with the World Trade Organization. But the government and businesses are not in the position to put their heads together to establish a strategy. In this environment where the government tries to make businesses obedient, they will not be able to combine forces and overcome this trade battle.