It’s easy to get lost in trade figures and statistics—exports, imports, deficits, surpluses—the totality of information available about trade is overwhelming. In 2016, U.S. goods and services trade with South Korea totaled around $144.6 billion. Exports were $63.8 billion and imports were $80.8 billion. It doesn’t take much more than a basic grasp of arithmetic to see that there’s a sizable gap between those two figures, which is often referred to by economists as the United States’ trade deficit with South Korea.
Cracking down on predatory behavior carried out by South Korean firms would help to reduce that gap.
South Korea’s foreign direct investment in the United States (stock) was $40.1 billion in 2015, up 0.5 percent from 2014, while South Korea’s direct investment in the United States is led by wholesale trade and manufacturing.
During his presidential campaign, Trump vowed to reverse the loss of jobs by reworking trade deals and threatening to place tariffs on goods, the production of which were shifted out of the country. His message resonated in Midwestern states such as Michigan, Ohio, and Wisconsin, which have all shouldered many manufacturing job losses.
Reworking trade deals is a great way for Trump to show our trading partners that he is serious about putting American workers back to work. Trump often invokes the “art of the deal”; it’s important that his actions resonate with our trading partners the same way his campaign rhetoric resonated with rust belt voters.
According to a recent report from the International Trade Commission, there is ample reason to believe that South Korean conglomerates Samsung and LG won’t follow through on their promised investments in new operations and manufacturing facilities here in the United States if the administration doesn’t implement stricture trade measures.
In the same report, the ITC wrote that a graduated tariff should be placed on imports of large residential washing machines above a 1.2 million-unit threshold over the next three years, starting at 50 percent the first year and sliding to 40 percent by the third.
Some, however, consider tariffs like these dangerous. Writing in The Daily Caller, Peter Roff argues that there’s a “danger…that protectionism could become the basis of Trump’s trade policy and, moreover, that U.S. companies could manipulate the concerns he expressed about bad trade deals during the 2016 campaign to carve out self-serving protections to which they are not entitled.”
In fact, America companies are entitled to protection. Our trade partners, including South Korea, are not playing fairly even within established trade agreement—a reality that weighs on the voters who elected Trump.
Trump is expected to make a decision on the ITC’s recommendation soon. If the president wants to do what’s best for American industry and fulfill his campaign pledge to put “American First,” then he should work with the office of the United States Trade Representative to enact the ITC’s policy recommendations.
Similarly, the United States-Korea Free Trade Agreement (KORUS) was signed in 2007 and went into force in 2012. Like NAFTA, the President should insist that this agreement be renegotiated.
Economics is not a popular topic, but economic growth certainly is, and if Trump can renegotiate a trade agreement which has increased our overall trade deficit and weakened American industry, his accomplishment will surely resonate with the electorate.