U.S. President Donald Trump has once again wielded tariffs as a tool of industrial policy. This time, it is not merely about increasing tariffs. The new "tariff carrot policy" offers tariff benefits to companies that use a certain percentage of American-made steel and aluminum. A 10% preferential tariff will apply to foreign equipment and machinery that use over 85% American steel and aluminum, while tariffs on agricultural machinery and some industrial equipment will be temporarily reduced.
On the surface, this appears to be a tariff reduction policy. However, the essence is different. Benefits are provided for using American raw materials, while the existing tariff burden remains for those that do not. This approach is more of an industrial incentive aimed at building a U.S.-centric supply chain rather than expanding free trade.
The Trump administration's policies have a consistent direction: to revive U.S. manufacturing and restructure supply chains around the United States. While past tariff policies served as a defensive barrier against foreign products, this new measure can be seen as an active supply chain policy encouraging foreign companies to use American raw materials and components.
It is noteworthy that U.S. industrial policy is becoming increasingly sophisticated. It is moving beyond simply raising tariffs to suppress imports and is now attempting to change companies' investment and purchasing decisions. The message to global companies is clear: to access the U.S. market, they must use American raw materials and integrate into the U.S. supply chain.
In fact, the U.S. is pushing for supply chain restructuring across strategic industries, including semiconductors, batteries, electric vehicles, steel, and rare earths. By simultaneously utilizing tariffs, subsidies, and tax incentives, the U.S. is guiding corporate decision-making toward a U.S.-centric model. We are transitioning from an era driven solely by market principles to one where national strategy dictates the direction of industries.
South Korean companies must respond more sensitively to these changes. The U.S. is one of South Korea's largest export markets, with key industries such as automobiles, machinery, steel, batteries, and semiconductors closely linked to the U.S. market. If the U.S. changes its supply chain standards, South Korean companies cannot escape the impact.
Moreover, this measure is not limited to the steel and aluminum industries. In the future, factors such as origin, production location, and the ratio of raw materials used are likely to become critical elements determining corporate competitiveness. A new era is approaching where tariffs and market accessibility will vary based on the country of origin of materials used, even for the same product.
A more significant concern is that this trend is unlikely to be a temporary phenomenon. The supply chain-focused industrial policy initiated by the Trump administration enjoys support across the U.S. political spectrum, regardless of changes in administration. Both Democrats and Republicans recognize the need for manufacturing revival and supply chain stability. While the methods of U.S. prioritization may change, the overall direction is unlikely to shift significantly.
Ultimately, South Korea needs a new perspective. It is becoming increasingly difficult to maintain competitiveness solely through cheap production and export expansion as in the past. Supply chain strategy is now synonymous with industrial strategy, and national strategy. Decisions about which markets to connect with, what raw materials to use, and which countries to collaborate with will determine corporate survival.
Trump's latest tariff incentive policy is an extension of U.S. manufacturing protection measures. However, what is more crucial for South Korea is the signal this policy sends. The global economy is transitioning from an era of free trade to one of strategic supply chain competition. Both South Korean companies and the government must redesign their industrial policies and trade strategies to align with these changes, as the era where the country that dominates supply chains controls industrial competitiveness has already begun.
On the surface, this appears to be a tariff reduction policy. However, the essence is different. Benefits are provided for using American raw materials, while the existing tariff burden remains for those that do not. This approach is more of an industrial incentive aimed at building a U.S.-centric supply chain rather than expanding free trade.
The Trump administration's policies have a consistent direction: to revive U.S. manufacturing and restructure supply chains around the United States. While past tariff policies served as a defensive barrier against foreign products, this new measure can be seen as an active supply chain policy encouraging foreign companies to use American raw materials and components.
It is noteworthy that U.S. industrial policy is becoming increasingly sophisticated. It is moving beyond simply raising tariffs to suppress imports and is now attempting to change companies' investment and purchasing decisions. The message to global companies is clear: to access the U.S. market, they must use American raw materials and integrate into the U.S. supply chain.
In fact, the U.S. is pushing for supply chain restructuring across strategic industries, including semiconductors, batteries, electric vehicles, steel, and rare earths. By simultaneously utilizing tariffs, subsidies, and tax incentives, the U.S. is guiding corporate decision-making toward a U.S.-centric model. We are transitioning from an era driven solely by market principles to one where national strategy dictates the direction of industries.
South Korean companies must respond more sensitively to these changes. The U.S. is one of South Korea's largest export markets, with key industries such as automobiles, machinery, steel, batteries, and semiconductors closely linked to the U.S. market. If the U.S. changes its supply chain standards, South Korean companies cannot escape the impact.
Moreover, this measure is not limited to the steel and aluminum industries. In the future, factors such as origin, production location, and the ratio of raw materials used are likely to become critical elements determining corporate competitiveness. A new era is approaching where tariffs and market accessibility will vary based on the country of origin of materials used, even for the same product.
A more significant concern is that this trend is unlikely to be a temporary phenomenon. The supply chain-focused industrial policy initiated by the Trump administration enjoys support across the U.S. political spectrum, regardless of changes in administration. Both Democrats and Republicans recognize the need for manufacturing revival and supply chain stability. While the methods of U.S. prioritization may change, the overall direction is unlikely to shift significantly.
Ultimately, South Korea needs a new perspective. It is becoming increasingly difficult to maintain competitiveness solely through cheap production and export expansion as in the past. Supply chain strategy is now synonymous with industrial strategy, and national strategy. Decisions about which markets to connect with, what raw materials to use, and which countries to collaborate with will determine corporate survival.
Trump's latest tariff incentive policy is an extension of U.S. manufacturing protection measures. However, what is more crucial for South Korea is the signal this policy sends. The global economy is transitioning from an era of free trade to one of strategic supply chain competition. Both South Korean companies and the government must redesign their industrial policies and trade strategies to align with these changes, as the era where the country that dominates supply chains controls industrial competitiveness has already begun.
* This article has been translated by AI.
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