hankyoreh

 US President Donald Trump. (AFP/Yonhap News)

The four years of the Donald Trump administration have been four years of trade balance warfare for the US’ major trading partners, including South Korea, China, and Germany. But in terms of comprehensive trade balance indicators, the four years have ended in failure for Trump. Among the US’ top eight trade partners, the only ones that the US has succeeded in improving its trade balance with over the past four years are South Korea and the UK; in the cases of China, France, Mexico, and Taiwan, the trade deficits have only grown. This signals the declining significance of South Korea and the UK as part of the US’ trade deficit distribution during the Trump era, and the growing importance of other major economies.

As soon as he took office in January 2017, Trump launched a full-scale assault on various countries under the “America First” banner with trade warfare, application of Section 232 of the Trade Expansion Act, and renegotiation of free trade agreements (FTAs). His basis for this trade warfare was the US’ enormous trade deficit. Now that the Trump era is drawing to a close, how does his report card stand?

The Hankyoreh analyzed information related to the US’ top eight trading partners (South Korea, China, Japan, Taiwan, Germany, France, the UK, and Mexico) in US Department of Commerce trade figures for the eight years between 2013 (the first year of Barack Obama’s second term) and September 2020. To begin with, the scale of the US’ annual trade deficit (exports minus imports) with the rest of the world ranged between US$688 billion and US$737 billion during Obama’s term from 2013 to 2016. Since Trump took office, it has risen steadily, reaching US$796.1 billion in 2017, US$878.6 billion in 2018, and US$853.2 billion in 2019; as of September, the 2020 deficit stood at US$649.4 billion. In other words, the deficit has risen by around US$100 billion even amid the US’ trade war with the rest of the world.

The only partners with which the US has been able to reduce its deficit are South Korea and the UK. After crossing the US$20 billion mark for the first time in 2013 at U$20.6 billion, the US’ annual trade deficit with South Korea remained steadily in the US$25-28.3 billion range between 2014 and 2016. Since Trump took office, it has declined, reaching US$22.88 billion in 2017, US$17.9 billion in 2018, and US$20.6 billion in 2019. This has been interpreted as the US reaping rewards from its efforts to pressure South Korea into greatly increasing its imports of US items such as shale, natural gas, and weapons on the pretext of “renegotiating” the South Korea-US Free Trade Agreement. A similar reversal of trends was observed in trade with the UK. From 2000 to 2015, the US had maintained a deficit in its trade with the UK; throughout the four years of the Trump administration, it has registered a surplus. As of September, the cumulative 2020 surplus stood at US$6.8 billion.

Apart from its staunch allies South Korea and the UK, the US’ trade deficits have either grown or remained more or less unchanged despite “America First” trade policies. In the case of China, the US’ trade deficit has risen from its Obama administration range of US$318.4-365.6 billion annually. In 2018, it passed US$400 billion to reach US$419.1 billion. This has been the backdrop for the Trump administration’s rush into a trade war with China. The trade deficit with neighboring Mexico has increased substantially from its level of US$53.8-63.1 billion during Obama’s second term. In trade with France and Taiwan, the respective annual deficits have grown to around US$5 billion and US$10 billion. The trade deficits with Japan and Germany have both fallen in the range of US$70 billion annually, or roughly the same levels as during Obama’s second term.

The country distribution of the US’ trade deficit has undergone a shift. For the last year of Obama’s administration in 2016, the ranking had China in first place at 47.2%, followed by Japan (9.3%), Germany (8.8%), Mexico (8.6%), South Korea (3.7%), and Taiwan (1.8%). For 2020, the ranking as of September had China at 34.3%, Mexico at 12.2%, Germany at 6.3%, Japan at 5.7%, Taiwan at 3.2%, and South Korea at 2.4%. In other words, the partners that have borne the relative brunt of Trump’s trade onslaught — China, Japan, South Korea, and Germany — now account for smaller percentages of the US’ total trade deficit. In effect, Trump’s trade warfare has proven effective in individual “battles” to change the distribution, but the “war” itself has been lost. Je Hyun-jung, a department director at the Korea International Trade Association’s Institute for International Trade, noted, “There’s been criticism already in the US, with people arguing that Trump’s talk about reducing the trade deficit is just talk and that the scale of the deficit has actually grown.”

“This proves that trade deficits can’t be changed artificially,” Je said.

Indeed, it should be noted that individual countries’ trade balances are influenced by fluctuations in the value of their own currency relative to the US dollar, and that each one has different major trade items. With conflicting economic effects such as exchange rate appreciation and depreciation associated with trade balances, it cannot be said that a larger surplus is necessarily a positive thing for the national economy. In a case where the trade surplus increases due to a decline in imports of capital goods, domestic investment and production may decrease.

By Cho Kye-wan, staff reporter

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