U.S.-China Tariff War: A Comprehensive Analysis of the New Phase in Global Economy and National Response Strategies

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U.S.-China Tariff War: A Comprehensive Analysis of the New Phase in Global Economy and National Response Strategies

The U.S.-China tariff war is reshaping the international economic landscape, bringing fundamental changes to the global economic order beyond a simple trade dispute. In this article, we will comprehensively analyze the background and development of the U.S.-China tariff war, key issues, and response strategies of countries around the world.




Table of Contents

  1. Origins and Background of the U.S.-China Tariff War
  2. Key Issues and Impacts
  3. Response Strategies of Countries Worldwide
  4. Global Corporations' Response Strategies
  5. Impact on the Korean Economy
  6. Future Outlook and Implications

Origins and Background of the U.S.-China Tariff War

The tariff war did not begin overnight. This conflict, which intensified during the Trump administration in 2018, has continued for years and persists today, having carried through the Biden administration.

When the United States first imposed high tariffs on Chinese products, there were two main objectives: resolving trade imbalances and competition for technological hegemony. In particular, the U.S. has consistently expressed concerns about China's intellectual property infringement and forced technology transfer practices.

Chronology of the Tariff War

  • January 2018: U.S. imposes safeguard tariffs on solar panels and washing machines
  • March 2018: U.S. imposes 25% and 10% tariffs on steel and aluminum respectively (Section 232 measures)
  • July 2018: U.S. begins imposing 25% tariffs on $34 billion worth of Chinese products (Section 301 measures)
  • 2018-2019: Multiple rounds of tariff expansions and negotiation attempts between the U.S. and China
  • January 2020: Phase One trade agreement signed between the U.S. and China
  • 2021: Biden administration largely maintains Trump-era tariff policies
  • 2023-Present: Conflict expands to advanced technology sectors including semiconductors, electric vehicles, and batteries

Key Issues and Impacts

1. Semiconductor and Advanced Technology Sectors

At the forefront of the tariff war is the semiconductor industry and other advanced technology sectors. The U.S. is restricting chip exports and related equipment to China to counter the development of China's semiconductor industry. This is perceived as a matter directly related to national security rather than a simple trade issue.

2. Global Supply Chain Restructuring

Coupled with the COVID-19 pandemic, the U.S.-China tariff war has brought significant changes to corporate supply chain strategies. Many companies have adopted the "China Plus One (China+1)" strategy to reduce dependence on China, with clear movements toward diversifying production bases to Vietnam, India, Mexico, and other countries.

3. Direct Impact on Citizens' Lives

While the tariff war may appear to be a policy clash between governments, its effects directly impact the everyday lives of ordinary citizens.

Rising Consumer Prices

Tariffs ultimately lead to increased consumer prices. According to various studies, a significant portion of the tariff costs imposed by the U.S. on Chinese products has been passed on to American consumers. In a situation of heightened inflationary pressures, the additional cost burden from tariffs is having a negative impact on the overall economy.

Price Increases for Daily Necessities

Price increases are particularly pronounced for everyday consumer goods such as clothing, footwear, electronics, and furniture. In the U.S., it is estimated that the average household bears an additional annual cost of $300-700 due to tariffs on Chinese consumer goods. In China, retaliatory tariffs on U.S. agricultural products have led to rising food prices.

Jobs and Employment Instability

Industrial restructuring due to tariffs can lead to job losses in certain industries. In the U.S., manufacturers dependent on Chinese intermediate goods have reportedly reduced employment or moved production overseas due to rising costs. Conversely, there is also the opposite effect of job creation in protected industries.

Impact on Pensions and Investment Assets

Increased stock market volatility due to the tariff war also affects pension and personal investment assets. In particular, individual investors' anxiety is growing as stock prices fluctuate sharply in response to trade dispute news.

4. Recent Trends

The United States and China remain in a tense conflict relationship. Competition is becoming even more intense in advanced technology fields, particularly in new technologies such as artificial intelligence and quantum computing.

The U.S. recently announced high tariffs on Chinese electric vehicles to protect domestic industries, while China is considering retaliatory tariffs on agricultural products and aircraft parts in response.


Response Strategies of Countries Worldwide

The U.S.-China tariff war is not just an issue between these two economic powers. Given the weight these giants hold in the global trade ecosystem, the ripple effects are spreading worldwide. Each country is employing various strategies to protect its interests.

European Union (EU) Response

The European Union has demonstrated one of the most systematic responses to U.S. tariff policies.

  • Strategic Retaliatory Tariffs: When the U.S. imposed tariffs on steel and aluminum, the EU imposed retaliatory tariffs on symbolic American products such as Harley-Davidson motorcycles, bourbon whiskey, and jeans.

  • WTO Complaints: The EU formally complained to the WTO that U.S. tariff measures violated international trade norms.

  • Maintaining Dialogue Channels: The EU pursued a flexible strategy of keeping negotiation tables open with the U.S. while taking firm countermeasures.

Canada and Mexico's Response

U.S. tariff pressure continued during the process of restructuring from the North American Free Trade Agreement (NAFTA) to USMCA.

  • Countervailing Tariffs: Canada imposed retaliatory tariffs on approximately $12.5 billion worth of U.S. products in response to U.S. steel tariffs.

  • Strengthening Negotiating Power: Mexico and Canada established a close coordination system to respond to U.S. tariff pressure during USMCA negotiations.

  • Supply Chain Diversification: While maintaining integrated supply chains within North America, they pursued export diversification to Asian and European markets.

Japan's Approach

Japan demonstrated a unique response approach in its relationship with the United States.

  • Restraint from Direct Retaliation: Japan did not take direct retaliatory measures against U.S. steel tariffs.

  • Strengthening Bilateral Trade Negotiations: Japan responded to automobile tariff threats through trade negotiations with the U.S.

  • Strengthening Technology Alliances: Japan strengthened cooperation with the U.S. in advanced technology fields such as semiconductors and batteries.

Korea's Pragmatic Approach

Korea demonstrated a pragmatic and strategic response to U.S. tariff measures.

  • Obtaining Exemptions through Negotiation: Korea demonstrated negotiating power by securing tariff exemptions in exchange for accepting a quota system for steel.

  • KORUS FTA Revision: Korea managed tariff threats in the automobile and steel sectors through renegotiation of the Korea-U.S. FTA.

  • Expansion of Advanced Industry Investments: Korean companies such as Samsung and SK strengthened relationships with the U.S. government while bypassing tariff barriers through large-scale investments in the United States.

India's Response

India was one of the countries that reacted sensitively to U.S. tariff measures.

  • Countervailing Tariffs: India imposed retaliatory tariffs on 28 U.S. products, including agricultural products and steel products, in response to U.S. steel and aluminum tariffs.

  • Response to GSP Status Loss: When the U.S. withdrew India's Generalized System of Preferences (GSP) status, India strengthened domestic market protection and export diversification strategies.

Opportunities for Vietnam and Southeast Asian Countries

Some countries have seized new opportunities amid the U.S.-China tariff war.

  • Benefits from Supply Chain Restructuring: Vietnam is a representative beneficiary of the U.S.-China tariff war, having expanded its manufacturing base transferred from China.

  • Trade Diversion Effect: Thailand, Malaysia, Indonesia, and others also expanded export opportunities amid the U.S.-China conflict.


Global Corporations' Response Strategies

Beyond national-level responses, global corporations are addressing tariff risks through various strategies.

1. Supply Chain Reconfiguration

Global companies such as Apple, Nike, and Dell have reduced dependence on China and diversified production bases to Southeast Asia, Mexico, India, and other regions. This is occurring beyond simple cost considerations, as part of geopolitical risk management.

2. Tariff Classification Optimization

Many companies have sought to minimize tariff burdens through review of product HS codes (Harmonized System codes). This represents a strategic approach to reducing tariff burdens within legal frameworks.

3. Strengthening Local Production

Companies like Tesla and Foxconn have adopted strategies to bypass tariff barriers by expanding local production. Particularly notable are the "In China, For China" and "In America, For America" strategies of establishing production bases in both U.S. and Chinese markets.

Impact on the Korean Economy

Countries with high export dependence like Korea are directly affected by the U.S.-China tariff war. The ripple effects are significant, especially as major export items such as semiconductors, auto parts, and displays are deeply integrated into the supply chains of both countries.

1. Risk of Export Slowdown

The United States and China are Korea's first and second largest export markets. As conflict between the two countries intensifies, Korea's export environment is likely to deteriorate. Particularly given Korea's export structure with its high proportion of intermediate goods, supply chain disruption between the two countries could be a direct blow.

2. Strategic Corporate Response

Korean companies are actively pursuing production base diversification and market diversification strategies to respond to this situation. In particular, large corporations are dispersing risk by expanding investments in the U.S., Southeast Asia, India, and other regions.

3. Need to Strengthen New Industry Competitiveness

As technology hegemony competition intensifies between the U.S. and China, Korea needs to further strengthen its competitiveness in key industries such as semiconductors, batteries, and biotech. This is a critical time to secure independent capabilities in advanced technology fields.

Future Outlook and Implications

Experts predict that the U.S.-China tariff war is unlikely to be resolved in the short term. Economic decoupling between the two countries is likely to proceed partially, with more distinct separation expected particularly in advanced technology fields.

Key Implications

  1. Importance of Multilateralism: A multilateral approach through international trade organizations (WTO), as demonstrated by the EU, can be effective in enhancing individual countries' negotiating power.

  2. Need for Flexible Strategies: Flexible strategies combining countermeasures and negotiations, as shown by Canada, Japan, and Korea, have often achieved practical results.

  3. Seizing Opportunities amid Crisis: As seen in Vietnam's case, agility in capturing new opportunities amid trade conflicts is important.

  4. Value Chain Diversification: Tariff risks are promoting restructuring of global value chains (GVCs), which will change the global trade landscape in the long term.

Future Outlook

The U.S.-China tariff war symbolizes fundamental changes in the global economic order beyond a simple trade dispute. The conflict between these two powers is expected to continue for the time being, acting as a factor increasing uncertainty in the global economy.

Looking ahead, attention should also be paid to the direction of tariff policies in the context of new global agendas such as digital trade and green transition. The importance of supply chain security and economic security is also expected to become more prominent.

In the midst of these changes, it is time for companies and investors to formulate strategies with more flexible and long-term perspectives. It will be important to continuously monitor the progress of the tariff war and prepare appropriate response measures.