The 'Three-Legged Stool' Economic Philosophy of the Trump Administration (Part 3) | Comprehensive Policy Evaluation and the Korean Economy's Response

[Economic Analysis] The 'Three-Legged Stool' Economic Philosophy of the Trump Administration

The 'Three-Legged Stool', a metaphorical representation of the Trump administration's economic policy, symbolizes his core national agendas: Tariffs, Tax Cuts, and Deregulation. In this final part of the three-part series, we will comprehensively evaluate the overall interaction and limitations of the 'Three-Legged Stool' policy, and conduct an in-depth analysis of its implications and response strategies for South Korea, which has an export-driven economic structure.

The 'Three-Legged Stool' Economic Philosophy of the Trump Administration (Part 3)

The economic philosophy of the Trump administration appears, on the surface, to have clear goals. The plan was to restore the U.S. manufacturing base with protectionist tariffs, promote corporate investment with tax cuts and deregulation, and thereby create a virtuous cycle of economic growth. However, these three policies have been criticized for potentially clashing with each other and creating an 'unstable stool' that leads to complex risks. In this article, we will conduct an in-depth analysis of the overall impact of these policies and their implications for the Korean economy.

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1. Comprehensive Evaluation and Limitations of the 'Three-Legged Stool' Policy

The 'Three-Legged Stool' economic philosophy of the Trump administration can clash with itself, causing complex risks. For example, even if tax cuts and deregulation boost the domestic economy, protectionist tariffs can lead to retaliatory tariffs from trading partners, weakening the competitiveness of exporting companies and causing supply chain disruptions. This can ultimately fuel price increases within the U.S. and worsen inflation. Furthermore, the massive fiscal deficit caused by the tax cuts increases government debt, raising long-term economic instability. Instead of acting in a complementary manner, the 'Three-Legged Stool' can lead to 'policy conflict', increasing macroeconomic uncertainty.

2. Implications for the Korean Economy

The Trump administration's 'Three-Legged Stool' economic policy is bound to have a direct impact on South Korea, which has an export-driven economic structure. The protectionist tariff policy, in particular, poses a high risk of directly hitting major Korean export items such as automobiles, semiconductors, and steel. As seen in past cases of safeguards (emergency import restrictions) imposed on Korean washing machines and solar panels, the Trump administration is likely to easily use tariff barriers to protect its domestic industries.

Moreover, U.S. tax cuts and deregulation present new challenges for Korean companies. As the investment environment in the U.S. improves, domestic companies have a greater incentive to expand their local production facilities or move their R&D (research and development) investments to the U.S. This could lead to industrial hollowing-out in Korea and negatively affect the job market. The Korean government and companies must prepare for these changes by accelerating the transition to new and high-value-added industries and strengthening multilateral trade cooperation, among other strategic response measures.

3. Conclusion: The Need for a Response Strategy in a New Economic Order

The Trump administration's economic policy should be understood as an attempt to establish a new U.S.-centric economic order, going beyond simple protectionism. This new order challenges traditional free trade principles and will cause complex problems such as the reorganization of supply chains, increased exchange rate volatility, and a deepening of geopolitical risks. South Korea is at a juncture where it must respond to these changes not passively, but with proactive and preemptive strategies to turn uncertainty into opportunity.

The contents of this blog are for informational purposes only and should not be considered investment advice. Investment decisions should be made based on individual judgment and responsibility. Under no circumstances can the information in this blog be used as evidence for legal liability for investment outcomes.

▶Expand Reference Materials◀

1. Review of Key Contents and Impact of the Trump Administration's Tax Reform Plan - KCIF International Finance Center
2. Review of Changes in U.S. Financial Policy Following Trump's Re-election | KDI Economic Education and Information Center
3. Prospects for Policy Changes in the Climate Change and Energy Sectors under the Second Trump Administration and their Implications
4. "Stop fussing over the environment in the age of space development"...Trump makes rocket launches more free
5. Trump's Attempt to Undermine 'Financial Crisis Reflection'...Initiating the Repeal of the Dodd-Frank Act - The Hankyoreh
6. The Impact of Trump's Re-election on Korean Companies' U.S. Business - Shin & Kim
7. Changes in Trump's Second-Term Environmental Policy and the Impact on the Sustainable Finance Market - Capital Market Research Institute
8. The Trump Era Again (3): Financial Policy, Too, is Back to Being Trumpian | KDI Economic Education and Information Center