Then-U.S. President-elect Donald Trump delivers a speech next to Howard Lutnick, CEO of Cantor Fitzgerald and Secretary of Commerce nominee, at Mar-a-Lago in Palm Beach, Fla. Dec. 16. Reuters-Yonhap

When the Washington Post on Jan. 6 reported that then-U.S. President-elect Donald Trump might impose universal tariffs on certain critical sectors, rather than all imports, the dollar index, which compares the value of the U.S. dollar against six major currencies, fell more than 1 percent, snapping the greenback's rally in recent months.

This ended in a short-term fluctuation, as Trump dismissed the report as "just another example of Fake News," and the dollar quickly recovered. However, the incident shows that the dollar's current rally is closely linked to Trump's tariff threats, and the global financial market is quite sure that he will use tariffs as his economic weapon.

On Jan. 14, Trump said in a social media post that he would create a new government agency called the External Revenue Service, "to collect tariffs, duties and all revenue," adding that the agency would be set up as soon as he assumes office. While specific details about the agency remain unclear, U.S. media reports suggest this is a strong indication that the president is preparing to introduce new tariffs early in his second term.

So far, Trump has threatened a universal duty of 10 or 20 percent on all imports, 25 percent on those from Mexico and Canada, and 60 percent on those from China. Trump's aides, including commerce and treasury secretary picks Howard Lutnick and Scott Bessent, are strongly backing the idea, and experts are saying chances are high that the president may declare a national economic emergency to provide legal justification for universal tariffs in the early stages of his administration.

It remains uncertain how the proposed universal tariffs will impact Korea's trade with the United States. However, the Korea Institute for Industrial Economics & Trade estimates that Korea's exports to the U.S. could decrease by 9.3 to 13.1 percent, depending on various scenarios. This reduction translates to a potential loss of 7.9 trillion ($5.37 billion) to 10.6 trillion won in added value.

Scott Bessent, center, U.S. treasury secretary nominee, walks through Capitol Hill in Washington, Dec. 11. Reuters-Yonhap

"Judging by Trump's Cabinet picks, he is selecting individuals who are more inclined to impose tariffs, making it almost certain that tariffs will be introduced," Jang Sang-sik, head of trade trend analysis at the Korea International Trade Association (KITA), said.

"The question is how. If tariffs are imposed universally, it could be done through Section 301, but that process typically takes a few months. That's why there are expectations that Trump may declare a national economic emergency to use the International Emergency Economic Powers Act (IEEPA)."

Previously, including the first Trump administration, the U.S. has been using Section 301 to impose tariffs against a trading partner deemed to be engaging in unfair trade practices. This however, requires months of hearings, while Trump is threatening to impose tariffs immediately.

Instead, the IEEPA unilaterally authorizes a president to manage imports during a national emergency. The IEEPA is an updated version of the 1917 Trading with the Enemy Act, which the former U.S. President Richard Nixon invoked in 1971 to impose a 10 percent universal tariff to ease a balance of payments crisis, according to Reuters.

An aerial view of newly imported cars parked at an automobile terminal at the Port of Los Angeles in Wilmington, Calif., Dec. 4. AFP-Yonhap

Growing uncertainties

Though Trump dismissed the Washington Post report suggesting he may impose duties only on certain critical sectors, experts noted that the new administration must also weigh the potential impact of tariffs on the U.S. domestic economy, particularly inflation. As a result, they speculate that there are chances that Trump may slap universal tariffs first and adjust them to target specific industries through negotiations.

KITA's Jang said that the new U.S. administration may focus on three key areas for tariffs: critical items that play a vital role in supply chains, manufacturing sectors like steel and automobiles, and industries that the U.S. is suffering significant trade deficits.

"In those areas, the primary target will likely be China, but the next could be Korea," Jang said. "It is unlikely that the U.S. would adopt a strategy that turns every country into a trade adversary. If tariffs are imposed selectively, they would likely target the previously mentioned areas. Alternatively, if blanket tariffs are introduced, the U.S. may apply them broadly at first and then negotiate exemptions or adjustments with individual allies through bilateral agreements."

No matter how Trump's tariff threats may materialize, one industry likely to face challenges is the battery sector. Last month, a Reuters report cited a Trump transition team document that said his administration is expected to "institute tariffs on the EV supply chain," including batteries and critical minerals using Section 232, which targets national security threats, to limit imports of such products.

Gary Shapiro, CEO and vice chair of the Consumer Technology Association, speaks out against tariffs before a Panasonic keynote at CES 2025 in Las Vegas, Jan. 7. Reuters-Yonhap

Section 232 of the Trade Expansion Act is one that the Korean industry is all too familiar with as it was previously used to target Korean steel, aluminum and automobiles during the previous Trump administration.

In 2018, then-President Trump imposed additional duties of 10 and 25 percent, respectively, on certain imports of aluminum and steel products to the U.S. Korea managed to secure a tariff-free quota of 2.63 million tons in steel exports through negotiations.

In a Jan. 13 report, KITA stressed that "it is hard to rule out the possibility of the second Trump administration demanding a reduction in the tariff-free quota or imposing additional duties by using Section 232."

Automobiles can also be subject to Section 232. In May 2018, Trump ordered then-U.S. Secretary of Commerce Wilbur Ross to launch an investigation into car and truck imports citing national security, but this did not result in actual tariffs on cars.

Shipping containers are stacked at a pier in Busan Port, Dec. 31. Yonhap

However, on the campaign trail, Trump blamed imports of cars and auto parts for trade deficits and vowed to impose high tariffs, using Section 232 as a tool.

"The second Trump administration is expected to pursue proactive tariff measures ahead of the midterm elections in November 2026, utilizing congressional legislation and executive orders," the KITA report noted. "There is a possibility of imposing tariffs through the IEEPA, and caution is required regarding the potential targeting of specific countries and items where tariffs would have a more substantial impact."