U.S. President-elect Donald Trump has reignited controversy with his proposal to impose a 25% tariff on all imports from Mexico and Canada. In a post on Truth Social, Trump announced that one of his first executive actions would be to implement this tariff on goods entering the U.S. from its northern and southern neighbors. He justified the move by accusing both countries of exploiting what he described as "ridiculous open borders." The proposal has sparked concern not only in Mexico and Canada — key partners in the U.S.-Mexico-Canada Agreement (USMCA) — but also in other nations with substantial trade surpluses with the U.S., such as South Korea.

Trump justifies these tariffs by linking them to illegal immigration, particularly from Mexico and Canada, and the rise in drug-related crime. He has also claimed that much of the fentanyl fueling the U.S. opioid crisis is imported from China, promising to impose additional tariffs on Chinese goods until such imports are eliminated. This stance signals a broader escalation in Trump's trade policies, foreshadowing a potential tariff war during his administration. For countries like South Korea — whose trade relationship with the U.S. includes a significant surplus — there is growing concern about being caught in the crosshairs of Trump's aggressive trade measures.

South Korea, a major trading partner with the U.S., faces significant risks from Trump's proposed tariffs. With strong trade ties to both Mexico and the U.S., South Korean companies operating in the Central American country stand to be among the hardest hit. Many of these businesses, particularly in the automotive and home appliance sectors, have heavily invested in Mexico to capitalize on its lower labor costs and tariff-free access to the U.S. market. In 2023, South Korea emerged as Mexico's second-largest foreign investor, pouring over 1 trillion won ($716 million) into the country. A 25 percent tariff on goods manufactured in Mexico would sharply increase the cost of exporting these products to the U.S., undermining the profitability of these investments. This could force South Korean firms to rethink their strategies and restructure global supply chains to adapt to the new trade landscape.

The prospect of tariff impositions on South Korean goods produced in Mexico is just one part of a wider threat posed by Trump's trade policies. With South Korea's significant trade surplus with the U.S., it is highly likely that the Trump administration will scrutinize the KORUS Free Trade Agreement (FTA) more closely once it takes office. Trump has already criticized South Korea in the past over what he perceives as an imbalance in trade, and he may use this as leverage to press for further concessions, including demanding that Seoul shoulder more of the cost of maintaining U.S. military forces in South Korea. Such demands would add further strain to the bilateral relationship.

In light of these developments, it is imperative that the South Korean government adopt a proactive approach. The Yoon Suk Yeol administration must prepare to engage with the Trump team, emphasizing the value of the U.S.-South Korea alliance and the mutual benefits of close economic cooperation. The U.S. is eager to revitalize its manufacturing sector, and South Korea's strong position in industries like semiconductors, automobiles and electronics could be an asset in such efforts. South Korea should remind the U.S. that a stable and robust economic partnership will contribute to job creation and economic growth in both countries.

Moreover, South Korea must also highlight the critical strategic importance of the bilateral alliance, especially in the face of increasing North Korean threats. The U.S. military presence in South Korea is not just a security asset for the region but also a strategic necessity for the United States. It is essential that Trump respects the value of this partnership and does not undermine it in pursuit of short-term trade gains.

South Korea's strategy should be one of flexibility, pragmatism and realism. Rather than simply resisting U.S. tariffs or pushing back against demands for further concessions, South Korea should offer mutually beneficial proposals. This could include expanding cooperation in sectors where both nations stand to gain, such as technology, clean energy and regional security. South Korea's ability to navigate these challenges will depend on its capacity to respond quickly and decisively to the shifting dynamics of international trade under Trump's administration.

The looming trade war and the prospect of tariffs on imports from Mexico, Canada and other countries pose serious challenges. South Korea, while maintaining its strong economic ties with the U.S., must remain vigilant and agile in the face of these threats. The Yoon administration must approach these challenges with a clear understanding of the broader geopolitical and economic implications, ensuring that any agreements or compromises made are beneficial to both nations in the long term. The coming months will require diplomatic skill and strategic foresight to weather this storm effectively.