“The global economy is being pulled into massive uncertainty, where its fate could hinge on the tariff decisions of the U.S. president,” said Paul Krugman, a professor at the City University of New York. “There are growing fears that Trump’s tariff policies could trigger a repeat of the economic turmoil caused by protectionism in the 1930s,” noted Douglas Irwin, a professor at Dartmouth College.
As concerns mount over the fallout from U.S. President Donald Trump’s global tariff war, which began after he took office in January, leading American economists interviewed by The Chosunilbo warned that the risk extends far beyond the borders of the United States. “The danger is that it could drag down the world economy,” they said. Since the start of his second term, Trump has announced steep tariff increases not only on strategic rival China but also on key allies, including Canada and Mexico. Tariffs have risen on major imported goods such as steel and automobiles. On April 1, the White House announced that Trump will unveil a policy of “reciprocal tariffs”—described as the most comprehensive of his tariff measures to date—at 4 p.m. on April 2 (U.S. time). Under this policy, U.S. tariffs will be adjusted to match the tariff and non-tariff barriers of other countries, following a comprehensive review of global trade restrictions. White House spokesperson Caroline Leavitt stated that the policy will take immediate effect upon its announcement.
The administration argues that the plan will reduce imports, boost domestic employment, and increase tariff revenue. However, economists interviewed by this newspaper cautioned that the potential consequences could far outweigh any short-term benefits, calling the move perilous. Barry Eichengreen, a professor at the University of California, Berkeley, and a leading expert on the Great Depression, warned: “One of the reasons the Great Depression lasted so long was because countries engaged in tit-for-tat tariff hikes. We must remember that misguided policies can spiral into catastrophe.” Simon Johnson, a professor at the Massachusetts Institute of Technology and recipient of the 2023 Nobel Prize in Economics, said Trump’s sweeping tariff hikes “are increasing global uncertainty and raising the risk of an economic downturn worldwide.”
◇“South Korea must keep reminding Trump it is a key security and trade partner”
Many economists note that Trump’s broad-based tariff hikes—targeting both adversaries and allies—mirror the protectionist actions taken just before the Great Depression nearly a century ago. At the time, to quell domestic discontent among farmers over rising European agricultural imports, the U.S. government raised tariffs on imported goods by an average of six percentage points. In response, its trading partners retaliated with their own tariffs, shrinking global trade volumes and weakening the world economy. As Trump’s 21st-century tariff war intensifies, questions are emerging about its broader implications and how South Korea should respond. This newspaper spoke with four leading American economists to gather their insights.
◇Douglas Irwin, John French Professor of Economics at Dartmouth College
“U.S. manufacturing already hit by steel tariffs; economic slowdown underway.”
“Trade wars are invariably bad news for the global economy. History has shown that when nations, including the U.S., resorted to protectionism in the 1930s, the contraction in global trade had damaging consequences for economies worldwide.
Despite Trump’s assertions, his tariff policies are unlikely to benefit the U.S. economy. Some analysts estimate that the resulting trade slowdown could reduce U.S. gross domestic product (GDP) by 0.2 to 0.4 percent. While that may appear marginal, the cumulative impact is significant. Even in the early stages of this tariff escalation, early signs of a deceleration in U.S. economic growth are already visible.
Trump’s pledge to boost domestic manufacturing employment is also unlikely to bear fruit. For instance, the 25 percent tariff on automobiles and auto parts, set to take effect on April 3, will disrupt the highly integrated North American automotive industry. Similarly, higher steel tariffs will impact U.S. firms that depend on these inputs, including those in heavy machinery and agricultural equipment sectors. The real reason behind the decline in manufacturing jobs is not increased imports, but automation and technological advancements. Even if domestic production increases, that does not necessarily translate into job growth."
◇Barry Eichengreen, Professor of Economics and Political Science at the University of California, Berkeley
“Trump’s erratic tariff strategy undermines business investment and consumer confidence.”
“What makes Trump’s tariff strategy especially dangerous is its inconsistency. He frequently announces new tariffs, only to revise or delay them later. I believe a similar pattern may follow with the reciprocal tariffs expected to be announced on April 2. This cycle of repeated rollouts and retractions is creating confusion and uncertainty, harming both the U.S. and global economies.
Both consumers and investors are averse to uncertainty. Already, Trump’s trade policies are eroding consumer confidence. Many businesses are postponing investment decisions as they wait for trade conditions to stabilize. It is difficult to see how such instability could be economically beneficial.
Trump’s escalating tariff war threatens to undermine the foundations of global economic cooperation. The post–World War II international system—built on free trade and multilateral collaboration—has supported sustained global growth for decades. It is deeply troubling that Trump appears determined to dismantle that system. There is a genuine risk of witnessing a recurrence of the political and economic instability that followed the Great Depression and led to World War II. It seems as though Trump is attempting to return the U.S. economy to a 19th-century model, when tariffs accounted for about 80 percent of federal revenue. Today, that figure stands at under 2 percent—a stark contrast to the era he appears to be emulating."
◇Paul Krugman, Professor at the City University of New York’s Graduate Center
“The U.S. president’s discretion in trade policy is excessive... It is unpredictable what he will do next.”
“Trump imposing tariffs can be called ‘Schrödinger’s trade war.’ Taken from the theory of ‘Schrödinger’s cat’ in quantum mechanics, which is an experiment that proves that until the box was opened, the cat was both “dead and alive,” Trump’s tariffs exist simultaneously while being a confusing area. Repetitively, Trump announced tariffs and abruptly suspended them for a month. (In February, Trump declared 25% tariffs on Canada and Mexico, delaying it twice). The status quo is so uncertain that I find it difficult to predict whether Trump’s tariffs will trigger a global trade war.
Before dwelling on the impact of Trump’s trade policy, we must consider how a single person (President Trump) can make all these decisions. U.S. trade-related laws have granted significant discretion to the U.S. president in trade matters. We are forced in the dark about Trump’s future course of action. (In the 1930s, U.S. lawmakers disrupted tariff policies based on their districts' key industries; the government granted the president broad discretion over tariffs to prevent such issues.)
How the U.S. government treats countries with free trade agreements (FTAs), like Canada and Mexico, is also an important issue. In this situation, I would advise the Korean government and corporations (who are also FTA partners) not to rely solely on the Korea-U.S. FTA and to diversify their trade. They should increase their trading partners through additional FTAs to reduce the shocks from changes in U.S. trade policy."
◇Simon Johnson, Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management
“The situation in South Korea can be summed up in one word: uncertainty... We need to foster industries like K-pop and K-drama.”
If I were to summarize the current situation Korea is facing (sparked by Trump’s tariffs war) in one word, I would say ‘uncertainty.’ Economic and strategic uncertainty is continuously growing worldwide. Today’s closely consolidated global economy produces results from the interaction of various factors. It is difficult to imagine how these uncertainties surrounding Trump’s trade and economic policies will shake the global economy.
What South Korea can do right now is “persuasion.” I know that South Korea is an important U.S. ally and a great trade partner. While one might hope Trump realizes that on his own, I don’t think it will be easy. That’s why it’s crucial to remind the U.S. of South Korea’s position as a nation and an ally. I recommend emphasizing these points to the U.S. government as quickly and as thoroughly as possible.
Amid the economic uncertainty triggered by Trump’s customs duty policy, Korea must also plan ahead the direction of industrial development for future economic growth. The success achieved by Korea’s content industry is quite impressive. K-pop and K-drama have become envious role models for many countries. I believe expanding opportunities in these areas, which are relatively less affected by tariffs, are attractive options.
