Trump 2.0: How a Second Term Could Unleash a Diplomatic Storm on China

presidential election victory speech. 241106 AFP=Yonhap News. ⓒYonhap News” title=”▲ Former U.S. President Donald Trump is giving his presidential election victory speech. 241106 AFP=Yonhap News. ⓒYonhap News”/>

▲ Former U.S. President Donald Trump is giving his presidential election victory speech. 241106 AFP=Yonhap News. ⓒYonhap News

Fox News reported on the 6th (local time) that former President Donald Trump was elected as the 47th President of the United States.

Fox News reported that former President Trump had secured 277 out of 538 electoral votes.

The New York Times (NYT) also reported that as of 00:50 on the 6th, the prediction of the winner of the presidential election showed that former President Trump’s victory rate was 95%, and his chances of winning were very strong.

The Hill, an American political media outlet, also reported, “Trump has achieved an unlikely comeback by being elected president for the second time.” Citing the U.S. election website Decision Desk HQ (DDHQ), The Hill reported that former President Trump won the states of Pennsylvania and Alaska, securing exactly the 270 electoral votes necessary for election.

Former President Trump moved to the Palm Beach Convention Center in Florida, where supporters had gathered, and promised, “It is an honor to be elected as the 47th president. I will not rest until we create a strong and prosperous America. We will open a golden age for America.” did it

As former President Trump called for a ‘strong America’ upon his election, concerns are growing domestically that the ‘Trump risk’ will become serious. In addition to the continuation of the technology and trade war and the deepening of ‘America First’, there is also growing anxiety over security issues on the Korean Peninsula.

Right now, there is a possibility of renegotiation of defense spending, which former President Trump directly mentioned.

In a talk at the Chicago Economic Club on October 15, he said, “Korea is a ‘Money Machine,’” and pressured Korea to pay $10 billion (about 13 trillion won) in defense cost sharing. This is nine times the amount of 1.5192 trillion won in the 12th Defense Cost-Sharing Agreement (SMA) negotiated by South Korea and the United States.

There is no way former President Trump is unaware that the agreement, which will apply until 2030, has already been concluded. Nevertheless, they showed their intention to ignore the agreement and renegotiate. As Korea is viewed as a ‘money-making machine’ and a ‘security free rider’, concerns that the win-win negotiations will be broken and restarted from square one are gaining more weight.

Defense cost negotiation issues may not only increase financial burden but also increase security anxiety. Considering that the Korean Peninsula is in imminent crisis due to North Korea’s explosion of the inter-Korean road and railway and the launch of a projectile that appears to be a new solid-propellant intercontinental ballistic missile (ICBM), former President Trump’s perception that security is also a transaction is clearly revealed. .

In addition, he frequently flaunts his ‘bromance’ with North Korean Chairman Kim Jong-un, raising the possibility of ‘direct negotiations’ between North Korea and the United States after he returns to power. In this case, a fundamental reexamination of Korea’s security strategy becomes inevitable as ‘Korea passing’, in which important decisions related to the Korean Peninsula are made without us, may occur.

The same goes for scenarios in which sanctions against North Korea are lifted in exchange for a freeze on North Korea’s nuclear weapons, or disarmament negotiations are initiated while acknowledging North Korea’s status as a de facto nuclear state. There are voices raised that the international community’s justification for sanctions against North Korea is weakened and that not only the ROK-US alliance but also the security of the Republic of Korea could be shaken to the core.

▲ Supporters are cheering while watching the election count of Republican presidential candidate former President Donald Trump at the West Palm Beach Convention Center in Florida, USA. 241106 AP/Newsis. ⓒNewsis

The reality that conflict between the US and China and protectionist barriers will increase are also considered risks.

Previously, former President Trump attacked the Joe Biden administration’s Chips Act (Semiconductor Support Act), implying that he would cancel the existing subsidy policy and replace it with a ‘tariff bomb’.

Former President Trump pledged to impose tariffs of 10% to 20% on imported goods and more than 60% on Chinese products. The plan is to repair America’s chronic trade deficit structure with a ‘tariff bomb’. If this happens, it will inevitably be a serious blow to the Korean economy, which relies on its trade surplus with the United States.

In an interview on October 25, he said, “There was no need to give even a 10-cent subsidy,” and claimed, “If we raise tariffs, foreign companies will come to the United States and build semiconductor factories on their own.” He criticized the Biden administration’s Chips Act, which provides subsidies to foreign companies building semiconductor production facilities in the United States, as a “bad deal,” and clearly expressed his intention to pull out the “tariff card.”

Previously in July, “Taiwan has taken almost 100% of our semiconductor business,” and predicted a hard-line response against TSMC and others, so some analysts say that this statement was aimed at TSMC, but it is also interpreted that the front has now expanded to Korea. .

Therefore, domestic companies such as Samsung Electronics and SK Hynix, which believed in the U.S. government’s promise of subsidy support and had already begun construction of large-scale factories in the U.S. investing tens of trillions of won, were in trouble.

In addition, former President Trump frequently targeted Korea, a country with a trade surplus with the United States. At a campaign rally in Georgia on September 24, he mentioned Korea along with China and Germany and raised his voice, saying, “It will take away jobs and factories from other countries.” He then raised the theory of plunder, saying, “Korea has taken away many industries from the United States.”

Even during his first term in power, he put pressure on some countries, including Korea, saying, “We are not allies in trade,” so if he succeeds in his second term, he is likely to exert all-round pressure by imposing high tariffs, revising the Korea-U.S. Free Trade Agreement (FTA), and renegotiating defense spending. This is big.

Moreover, in the course of the trade war with China, our exports to China may be controlled. There are concerns about a fatal blow to the semiconductor industry. Even the Inflation Reduction Act (IRA) cannot be guaranteed. Korean companies that have entered the local market thanks to various subsidies from the current government may find themselves stranded.

▲ Supporters are cheering while watching the election count of Republican presidential candidate former President Donald Trump at the West Palm Beach Convention Center in Florida, USA. 241106 AP/Newsis. ⓒNewsis

There are also concerns about the ‘Trump trade’. ‘Trump trade’ refers to investing in assets affected by former President Trump’s return to power.

Former President Trump’s economic policies are generally considered pro-growth and a trigger for inflation, leading to higher U.S. Treasury yields and a stronger dollar.

International gold prices are breaking record highs every day. As volatility has increased due to former President Trump’s election, demand is flocking to gold, a representative safe asset.

Although it is somewhat slowing down, virtual currency is also a subject of major interest. The market remembers the friendly pledge of former President Trump, the self-proclaimed “virtual currency president,” to make the United States the virtual currency capital. In fact, Bitcoin jumped 7% that day, reaching an all-time high again.

Trump’s tariffs are expected to have an impact on Korea’s monetary policy.

If China and Europe reduce their purchases of U.S. Treasury bonds as a retaliatory measure, government bond yields will rise and market interest rates will also rise. Former President Trump is said to be pursuing a weakening dollar to increase the competitiveness of American exports, but this is actually causing a ‘strong dollar’. Looking at the period of former President Trump’s rise in approval ratings, the strong dollar phenomenon was noticeable as U.S. Treasury yields fluctuated.

According to Bank of Korea Governor Lee Chang-yong, who recently met with reporters in Washington, D.C., reducing the U.S. fiscal deficit is not expected to be easy, and an increase in the fiscal deficit could lead to the issuance of government bonds and a rise in interest rates, leading to a continued strong dollar. In this case, even leaving aside domestic house prices and household loan factors, it appears that it will not be easy to lower the base interest rate at the Monetary Policy Committee meeting on the 28th in order to defend the exchange rate.

In relation to this, the President’s Office said, “We will establish a perfect ROK-US security posture with the new administration in Washington so that our security will not be shaken one bit.”

Kim Tae-hyo, First Deputy Director of the National Security Office, held a briefing at the Presidential Office in Yongsan this afternoon and said, “We will change the ROK-US alliance into a stronger and more vibrant global comprehensive strategic alliance,” adding, “Therefore, we will do our best to ensure that our people can enjoy greater opportunities and benefits from the ROK-US alliance.” “I will do my best,” he said.