U.S. President Donald Trump fully implemented new reciprocal tariffs on all global trade partners starting Aug. 1 (local time). The high tariffs, which were announced in April during the 'Liberation Day' declaration, came to fruition after a 90-day postponement. This is interpreted as a strong signal to effectively mark the end of the free trade agreement (FTA) system led by the U.S. since World War II and to establish a new international trade order prioritizing national economic interests. Major media outlets evaluated this action as the strongest return to protectionism in nearly 80 years since the 'Smoot-Hawley Tariff Act' that worsened the Great Depression in the 1930s.
According to a new reciprocal tariff factsheet released by the White House on that day, the basic framework of the new tariff policy clearly differentiates based on the current U.S. trade balance. Countries with which the U.S. has a trade surplus will maintain the current 10% tariff. Instead, it was established as a principle to impose at least a 15% tariff on countries causing a trade deficit. This reflects Trump's 'fair trade' logic, where higher tariff rates apply the larger the trade imbalance with the U.S.
Each country accepted different tariff schedules based on their circumstances. Most allied nations promised substantial investments and purchases in exchange for 'tariff reductions.' Countries that angered the U.S. had to endure harsh punitive tariffs.
Key allies such as South Korea, Japan, and the European Union (EU) agreed to exchange '15% tariffs for large-scale investments.' The EU promised to purchase $750 billion (approximately 1,040 trillion won) of U.S. energy and an additional $600 billion in investments. Japan also unveiled investment plans worth $550 billion (approximately 760 trillion won) in areas like semiconductors and AI. South Korea was reported to have promised $350 billion in investments in semiconductors and biotechnology in exchange for being subject to a 15% rate instead of a 25% tariff threat. Effectively, the tariff rate was bought with money.
On the other hand, some countries were subjected to punitive tariffs for reasons related to security and drug issues. The neighboring country Canada saw its tariff dramatically increased from 25% to 35% on the grounds that it 'failed to prevent the distribution of illegal drugs like fentanyl.' The Financial Times (FT) quoted an official from the Trump administration as saying, 'Canada did not show a constructive attitude in negotiations, like Mexico.' Brazil faced a punitive tariff bomb of 50% on coffee beans. Neutral Switzerland, despite President Karin Keller-Sutter attempting a last-minute call with President Trump, could not avoid the 39% high tariff. Switzerland recorded a trade surplus of $38.5 billion (approximately 53 trillion won) in the U.S. market last year with high-value products like pharmaceuticals and precision machinery.
Major trading countries like China, India, and Mexico did not completely finish negotiations by the deadline. Mexico secured an additional 90 days for negotiations. China, which faced a crushing tariff of 145%, was given a temporary pause in the tariff war until Aug. 12. President Trump is set to meet with Chinese President Xi Jinping later this year. India faced a 25% tariff and unspecified penalties for purchasing Russian oil and weapons.
The Trump administration introduced a clause for a 40% punitive tariff to prevent 'transshipping,' which involves exporting goods to a third country to evade tariffs. The Wall Street Journal (WSJ) reported that this regulation aims to target China directly while also pressuring Southeast Asian countries like Vietnam, which are noted as major transit points for Chinese products.
The White House stated that this measure was 'to correct unfair trade practices that have persisted for decades and to protect American workers.' It emphasized that the tariff policy 'will promote the revival of U.S. manufacturing, strengthen supply chains, and contribute to national finances through substantial tariff revenues.' President Trump expressed on his social media, 'The tariffs are making America great and prosperous again,' asserting a restoration of economic sovereignty through 'America First' principles.
However, there is considerable criticism in the U.S. regarding the results of the negotiations. The Yale Budget Study Institute analyzed that the tariffs could impose an additional burden of $2,400 (approximately 3.3 million won) per year on U.S. households. Manufacturers heavily reliant on imports are warned that costs could increase by as much as 4.5%, which could lead to an increase in consumer prices.
Experts analyze that this measure attempts to dismantle the multilateral FTA framework that has lasted for 80 years since World War II and to reshape the global trade order based on 'the logic of power' through bilateral negotiations. This goes beyond merely adjusting tariff rates and is expected to have far-reaching impacts on future global supply chains and competition for technological hegemony.
In the short term, the U.S. negotiating power may be maximized, but there are concerns that it could increase global economic uncertainty and harm alliance relations in the long term. There are analyses that movements to form independent economic blocks away from the U.S.-centric supply chain may accelerate. Some countries in the EU, like France, have raised voices that they 'haven't become a sufficiently daunting presence for the U.S.' and should strengthen their independent path in Europe. Some expect that the final results of tariff negotiations with China, currently in a state of temporary truce, could become a significant turning point for the future of the global economy.