President elect Donald Trump,
who is about to take office, is expected to impose universal tariffs ranging from 10% to 20% on all countries, not just China. It remains to be seen whether he will use it as leverage in trade negotiations, but countries subject to tariffs need to respond. China plans to impose corresponding tariffs if Trump implements the policy, and the European Union (EU) is also preparing a list of tariffs on U.S. products. In addition, in November last year, Mexico's economy minister said, "If the U.S. imposes 25% tariffs, we should respond with tariffs," and countries are already busy responding to countermeasures. At this time, there is also a way to respond to "an eye for an eye, a tooth for an eye," and responding to tariffs with tariffs is called "retaliation tariffs."
When a trading partner causes significant damage due to discriminatory tariffs on Korea's exports, retaliatory tariffs are imposed on goods imported from a trading partner within the scope of a significant amount of damage in response. The price of imported goods rises when retaliatory tariffs are imposed between countries. Consumers in each country who have to pay higher prices than before have no choice but to reduce their purchases. This leads to a contraction of trade between countries. Of course, the government obtains tariff income, but in the long run, the decrease in international trade that would not have occurred without tariffs also reduces tariff income, resulting in the loss of welfare for the society as a whole. Since I have been killed, the 'zerosum game' retaliatory tariffs will only hurt each other. There have been cases in the past similar to the ongoing tariff war in the Smoot and Holi Customs Act of 1930. The Smoot and Holi Customs Act of 1930 imposes tariffs on an average of 59% and up to 400% on more than 20,000 imports. It was created to reduce imports and protect domestic industries and jobs by politicians when the severe economic recession caused by the Great Depression of the United States in 1929 caused massive unemployment and unstable society. So did this law get what it wanted?
After the Smooth and Holly Tariffs Act came into force,
US imports fell dramatically. By reducing imports and creating jobs in their own industries, you would have tried to increase exports. However, as other countries impose retaliatory tariffs in response, US exports also decline. And global trade volume has also shrunk. As a result, the United States, which had been recovering since the Great Depression, experienced a continued economic recession and a significant increase in unemployment. Looking back on the history of the Trump administration's tariff policies to protect its industry and jobs, it may be possible to find an answer.
