On Feb. 2 (local time), U.S. President Donald Trump announced a reciprocal tariff plan that imposes a 10% basic tariff on all imported goods and country-specific tariffs with additional duties on about 60 countries designated as 'worst countries' in the Rose Garden of the White House. The chart that Trump received from Secretary of Commerce Howard Lutnick indicated that South Korea imposes a 50% tariff on the U.S., therefore the U.S. set a 25% tariff on South Korea. Besides South Korea, China faces a 34% tariff, the European Union (EU) has a 20% tariff, Japan is subject to a 24% tariff, India faces a 26% tariff, Taiwan has a 32% tariff, and Vietnam faces a 46% tariff. The effective date for the basic tariff is set for the 5th of this month, while the country-specific tariffs will start on the 9th. However, reciprocal tariffs do not apply to automobiles, steel, aluminum, copper, and wood, which already have tariffs imposed.
Trump explained the global trading system that has been solidly established since World War II, stating, 'Americans who have worked hard for years have had to watch other countries become rich and powerful, and most of that was at our expense. Now it's our turn to prosper.' Trump criticized, 'Our country has been robbed by other countries,' and noted, 'In some cases, our allies treated us worse than our enemies.' He emphasized, 'If you want tariffs to be 0%, produce in the U.S.' and added, 'Taxpayers have been fooled for over 50 years, but that will not happen anymore.'
Trump claims that trade imbalances amounting to $1.3 trillion (approximately 1,910 trillion won) occurred last year due to trade barriers. He expects to generate hundreds of billions of dollars in revenue annually from the reciprocal tariffs. Above all, he anticipates the creation of factory jobs in the U.S. However, the Associated Press expressed concerns that 'the prices of automobiles, clothing, and other goods could skyrocket, leading to a sudden economic recession.' Bloomberg also criticized it as a 'historic gamble' expected to raise the costs of goods worth trillions of dollars shipped to the U.S. annually, stating it could provoke a global trade war characterized by making supply chains unstable, fueling inflation, and encouraging foreign powers to form new alliances excluding the U.S. They further pointed out, 'While the economic damages from tariffs will appear quickly, it could take years for any benefits from the restructuring of the U.S. economy to be realized.'
Such criticism can be understood by examining how tariffs are applied and who ultimately pays them. Tariffs are taxes imposed on imported goods. Therefore, tariffs have been used to make foreign products expensive, supporting domestic industries. Trump also presented the rhetoric of raising tariffs under the pretext of developing domestic industries. He has publicly declared his intention to correct what he calls 'unfair trade practices' through tariff imposition. The U.S. is the largest goods importer globally, having imported goods worth $3 trillion (approximately 4,409 trillion won) in 2023. The trade deficit stands at $1 trillion (approximately 1,469 trillion won). Trump argues that this trade deficit is due to the unfair practices of trading partners.
According to analysis by the Federal Reserve Bank of St. Louis, the tariffs collected by the U.S. in 2024 accounted for less than 3% of total federal revenue. The nonpartisan think tank 'Tax Foundation' estimates that the tariffs imposed on China during Trump's first term and the Biden administration's expansion of tariffs generated an annual revenue of $77 billion (approximately 113 trillion won). Peter Navarro, Director of the Trade Manufacturing Policy Office, stated that the tariff policy of the Trump administration would generate annual revenue of $700 billion (approximately 1,029 trillion won). This amount is about nine times the current U.S. Customs revenue.
However, with opinions divided on who ultimately pays the tariffs, it remains unclear whether the positive effects of tariffs can be reaped as Trump intends. Trump argues that exporting companies would be adversely affected by the tariff imposition. However, economists generally assert that when tariffs increase, U.S. consumers and companies will ultimately bear the burden. For instance, JPMorgan estimated that a 25% tariff could raise the price of a new car by $4,000 (approximately 5.88 million won). Since the additional costs resulting from tariffs tend to be borne by consumers, there is a possibility that living costs in the U.S. could rise due to tariff impositions. Furthermore, risks such as global economic growth stagnation and rising inflation are also raised. The Organization for Economic Cooperation and Development (OECD) recently warned that if the U.S. and all trade partners permanently increase tariffs by 10 percentage points (P), global production could decrease by approximately 0.3% within three years after implementation. The OECD also projected that global inflation could rise by an average of 0.4% in the first three years.