As the values of free trade and global common prosperity are shaken, the world is returning to protectionism. This is because we are now in an era where trade must be conducted under tariffs unilaterally set by U.S. President Donald Trump, who leads the largest market and economy in the world. While the United States, led by Trump, is overt about its approach, the European Union (EU) has already built barriers against foreign corporations through industrial policies and trade regulations disguised under the sophisticated concept of sustainability. Meanwhile, China has nurtured its industry through state-led industrial policies and has implemented trade policies to protect its domestic industries. As a result, it is now indiscriminately flooding the global market with products such as electric vehicles (EVs) that are overflowing from excess production.
This book was written by Kim Se-jin, head of the trade dispute response division at the Ministry of Trade, Industry and Energy, an expert in global trade disputes. Like the subtitle 'Strategies of Great Powers for Survival,' it discusses in detail the key industrial and trade policies of the U.S., EU, China, and India that Korea must respond to, as a guide for understanding. It also offers directions for Korean corporations and the government to respond.
Increasing import restrictions focused on national security
The author pointed out that the United States, which has pursued an economic development strategy based on free markets for half a century, has strengthened industrial policies based on onshoring during the Trump and Biden administrations. The U.S. has already created the Semiconductor Chips and Science Act, Infrastructure Investment and Jobs Act (IIJA), and Inflation Reduction Act (IRA) to escape dependence on the Asian semiconductor industry and promote onshoring. Although the tax cut and expenditure law known as One Big Beautiful Bill Act (OBBBA) was neutralized early last July during the Trump administration, in reality, the IRA was also a law designed to accelerate the establishment of a domestic supply chain in electric vehicles and clean energy. If the Biden administration facilitated onshoring through attracting key industries like semiconductors and providing subsidies, the Trump administration aimed to revive manufacturing by using tariff threats to induce the resumption of domestic production in major industries such as automobiles, semiconductors, and steel. Restrictions on imports citing national security are also gradually increasing. The Trade Expansion Act, enacted during President Kennedy's era in 1962, was created to grant the president tariff reduction authority. The Trump administration is utilizing Article 232 of this act as a means to trigger industry-specific tariffs under the pretext of 'national security.'
The 25% tariff on global automobile imports, a 50% tariff on steel, aluminum, and copper, and the tariffs intended for items like semiconductors and pharmaceuticals are all justified by risks to U.S. national security. It is not only the U.S. that utilizes trade policies in conjunction with industrial policies for domestic industry protection. The author points out that the EU's 'value-based trade policy,' which combines environment and technology, essentially serves as a 'regulatory powerhouse.' The EU's Green Deal, established in December 2019, is a representative European industrial policy aimed at achieving carbon neutrality by 2050. Policies focused on regulation based on values like sustainability and carbon reduction, such as the Carbon Border Adjustment Mechanism (CBAM), Corporate Sustainability Due Diligence Directive (CSDDD), and Digital Services Act (DSA), have been continually prepared. The author notes that EU environmental policies, such as the emissions trading system or the carbon border tax it has introduced, ultimately function as trade regulations for foreign corporations entering the EU market. The EU's digital industrial policy is more defensive than that of the U.S.
Trade regulations targeting China also expose Korea to risks
The book also dedicates a significant portion to analyzing the industrial policies and trade regulations of China and India. China, which has emerged as the world's second-largest economy through the benefits of free trade, is essentially the primary target of the trade regulations currently being issued by the U.S. and the EU. China's trade policy is defined as dual circulation (雙循環), which seeks both technological self-reliance and the expansion of its domestic market. China is operating large-scale industrial subsidy programs while adopting policies such as 'Made in China 2025' through its initiative called 'innovation-driven development strategy.' This has propelled it to become a manufacturing powerhouse in fields such as information technology, computer machinery, robotics, automobiles, medical devices, aerospace technology, as well as marine and rail transport, and advanced equipment. China has already reached a global level in batteries, electric vehicles, solar panels, and shipbuilding. Chinese batteries, solar panels, and electric vehicles are causing declines in relevant industries in the U.S. and Europe or exerting comparable pressure. For these reasons, as exports to the global market increase, they frequently become subjects of trade friction. The author emphasized that as the world strengthens regulations and sanctions targeting China, Korea is also exposed to increased risks due to its largest trading partner, China.
The author states that measures must be swiftly established to respond to the potential pressures from the influx of low-priced advanced products from China, indirect exports through Korea, and the possibility of additional sanctions. The current era can be defined as a 'conditional' free trade era where the 'visible hand' prioritizes the protection of domestic markets and industries over relying on market mechanisms, as countries like the U.S., EU, China, and India no longer leave international trade purely to the market. Familiar platforms like the World Trade Organization (WTO) or free trade agreements (FTAs) have now been pushed to the sidelines. The U.S., already the largest contributor to the WTO, has weakened the dispute resolution function of the organization by leaving its appellate body unstaffed. Nevertheless, the author emphasizes that there is still a need to explore new forms of cooperation, such as inter-regional cooperation or smaller multi-party cooperation.
Korean corporations must establish local networks to respond to trade regulations. The author emphasizes that in this jungle-like trade environment, corporations and the government must closely analyze the various trade regulations of each country and their trends. Concerning the EU market, which is becoming increasingly important as an alternative to the U.S., domestic companies are urged to receive support to comply effectively with EU regulations. The author notes that as a current trade expert, the legal compliance burden imposed on Korean corporations by the trade regulations of various countries is growing. Therefore, he stresses the importance of closely analyzing these regulations and building systems to comply with them. While government strategies are important, ultimately, corporations must quickly respond based on establishing local networks and understanding industrial policies and trade regulations.
In cases of local investments, the author reiterated the necessity of restructuring to maintain connectivity while distributing the value chain between the U.S. and Korea to prevent a decline of the Korean industry. In an era of protectionism, countries that cannot achieve self-sufficiency due to smaller markets are destined to be the weak. Korea is one of those countries. It must import crude oil, natural gas, grains, and feed, and the revenue earned from exports of semiconductors, automobiles, and machinery accounts for 40% of the annual gross domestic product (GDP). It is a typical export-dependent economic structure. In the reality where Korea cannot avoid dependence on trade, the author recommends this book for corporate stakeholders who need in-depth information about the industrial and trade policies and regulations of the U.S., China, EU, and India.
Glossary
1. One Big Beautiful Bill Act (OBBBA)
This is a large-scale budget reconciliation bill passed by the U.S. Congress on July 4, 2025 (local time), which encapsulates the policies of the Trump administration's second term. It includes key measures such as the permanentization of tax cuts and additional tax reductions, and a comprehensive overhaul of defense, energy, immigration, welfare, and industrial policies to prevent expiration of the tax cut and jobs act (TCJA) enacted during Trump's first term in 2017.
2. Dual circulation (雙循環)
This is a strategy announced by China in 2020 for restructuring its economy. The core of the strategy is to strengthen 'internal circulation' by shifting from an export-oriented economic structure to a domestic consumption-oriented one and to expand economic cooperation with Asia, Europe, and Latin America, replacing the U.S. through the Regional Comprehensive Economic Partnership (RCEP).
※ This article was published in the August issue of Monthly 'Trade'. Please search for 'Monthly Trade' on Naver.