KORUS FTA chief Cutler “Trump tariffs must be taken seriously”

[Interview] Wendy Cutler, vice president of ASPI

[by Newyork=Sangyoon kim] Donald Trump has been elected the 47th President of the United States. With control of the executive, legislative, and judicial branches of government, Trump is expected to push Trumpism harder than he did in his first term. In particular, it is expected that he will pursue strong trade pressure on partners, including universal tariffs. In this situation, we received an urgent diagnosis from leading US trade experts.

“I think Trump may be more aggressive this time around on trade matters. Our trading partners need to take seriously Trump‘s proposal for a 10 to 20% universal tariff hike. The impact will depend largely on what tariff rate is announced, what timetable they’re implemented on, but also, how our partners respond”

Wendy Cutler, vice president of the Asia Society Policy Institute (ASPI), who was the U.S. chief negotiator during the 2006 KORUS FTA negotiations, said in an interview with Edaily that Trump‘s tariff war could intensify further. “Trump tried to balance US trade during his first term, but many people are criticizing his failure in doing so,” she said, adding that this is why he is raising tariffs and making more aggressive comments on trade.

Wendy Cutler, vice president of the Asia Society Policy Institute (ASPI)

Cutler emphasized that Trump’s tariffs will be used as leverage in negotiations. “Trump will may give our partners a six-month period and say, ‘either you negotiate with us, or these tariffs go into effect on a certain date,’” she said, predicting that he will use the tariffs as bargaining leverage and exempt certain countries from the tariffs once negotiations are completed to his satisfaction.

The president of the United States has the authority to unilaterally impose tariffs under laws such as the International Emergency Economic Powers Act (IEEPA) and Section 122 of the Trade Act of 1974, given the size of the trade deficit and its impact on the U.S. economy. Cutler believes Trump will rely on these laws to justify the tariffs. “He believes he has sufficient legal justification under the IEEPA,” Cutler said, adding that the proposal would undoubtedly be challenged in court, a process that could take years to abjudicate.

Cutler expects Trump to use tariffs as leverage to revise bilateral and multilateral trade agreements. For starters, the U.S.-Mexico-Canada Trade Agreement (USMCA), signed during Trump‘s first term, requires a review of the agreement’s implementation every six years, the first of which is due in 2026. Whether it‘s Trump or Harris, Cutler expects the U.S. to prioritize revising the USMCA. “Mexico will be under pressure to renegotiate, including how to strengthen rules of origin for strategic manufactured products, including autos, and whether the USMCA labor provisions are sufficient,”

Cutler did not specifically address the possibility of Trump revising the KORUS FTA. “It’s an outdated agreement in many respects,,” she said, “I‘m not advocating for a renegotiation, I wonder if there are ways to quietly update our joint work in areas, where changes have occurred in the trade and investmen climate, including technological developments and economic security matters, including building resilient supply chaines.

Trump is poised for a “trade war” with China, threatening tariff hikes of at least 60 percentage points. “In many cases, tariffs on China are 25 to 30 percent now, and there is talk of adding 60 percentage points under Trump, which would take the tariffs to about 100 percent,” Cutler said, noting that such a move could trigger retaliation from China. “I think Beijing may would look way beyond tariffs, including holding back key items like critical minerals exports, hurting the United States, and to sending a clear message that these tariffs, at least in China’s view, are not welcome” she said.

Ms. Cutler advised that South Korea should take steps to reduce its trade deficit with the United States. While the U.S. trade deficit with South Korea is relatively small compared to China, the USMCA, and the European Union, it has grown rapidly over the past three years, at an average annual rate of 27.5%. This is, of course, due in part to increased exports of intermediate goods as Korean companies have increased significantly their investments in the United States.

“It‘s important for the Korean government to buy more from the U.S., but also find ways for Korean companies investing in the U.S. to source more from U.S. companies,” Cutler said. “I think this will help reduce the trade deficit between the two countries and reduce potential frictions”

“While Trump’s statements and proposals on trade and tariffs are all over he map, there is no doubt that he will take tariff actions early in a new term. South Korea, as well as out other trading partners need to be prepared for all types of twists and turns.”

김상윤 (yoon@edaily.co.kr)