Geopolitical Currency Linkages: Analyzing the Impact of Trump's Trade Policies on Global Currencies

I. Executive Summary

This report provides an in-depth analysis of the impact of the US-China trade dispute during former President Donald Trump's first term (2017-2021) on the relative strength and movements of major currencies, particularly the US Dollar (USD), Chinese Yuan (CNY), and Korean Won (KRW). Furthermore, it forecasts the potential effects of Trump's anticipated second term trade and economic policies on these currencies and the broader global economic implications.

During Trump's first term, the US-China trade war unfolded through a cyclical imposition of tariffs and retaliatory measures, leading to a significant depreciation of the Yuan. China adopted a strategic currency policy, allowing the Yuan to depreciate beyond the psychological threshold of 7 Yuan per dollar in response to tariffs. The Korean Won exhibited high synchronization with the Chinese Yuan, experiencing increased volatility. While some Korean sectors benefited from trade diversion as US imports from China decreased, the overall contraction in global trade and increased uncertainty negatively impacted the Korean economy.

Should Trump secure a second term, a more intensified 'America First' stance is expected, leading to aggressive trade policies such as high tariffs on all Chinese imports and the revocation of Most Favored Nation (MFN) status. This is likely to further strengthen the US Dollar and exert significant additional depreciation pressure on the Chinese Yuan. The Korean Won will face high volatility and further depreciation risks amidst this strong dollar and weak Yuan trend, potentially affecting the domestic economy through rising import prices and reduced investment. Globally, the key characteristics will be the spread of protectionism, increased inflationary pressures, heightened financial market volatility, and accelerated supply chain restructuring.

To navigate these complex challenges, South Korea must proactively establish a scenario-based response system, diversify export markets and products, strengthen domestic economic fundamentals, and stabilize supply chains through strategic trade diplomacy.

II. Introduction

The economic relationship between the United States and China, the two pillars of the global economy, profoundly influences global trade, investment, and financial stability. Together, their GDP accounts for 40% of the world's total, and they represent 22.6% of global trade, meaning changes in their trade policies have ripple effects worldwide. In particular, the US-China trade dispute ignited during former President Donald Trump's first term (2017-2021) transcended a mere tariff war, bringing about structural changes in global supply chains and currency markets.   

This report analyzes the key policy measures of the US-China trade war during Trump's first term and the resulting shifts in the relative strength of the US Dollar (USD) and Chinese Yuan (CNY). It also closely examines the movements of the Korean Won (KRW) and other major currencies (Euro: EUR, Japanese Yen: JPY) during this period. Furthermore, it projects the potential impact of Trump's anticipated second term trade and economic policy stance on each currency and the broader global economic implications, aiming to provide in-depth information for strategic decision-making by policymakers and businesses. This analysis will offer crucial insights for preparing for future uncertainties based on past experiences.

III. Trump's First Term (2017-2021): US-China Trade War and Currency Dynamics

A. US-China Trade War Timeline and Key Policy Measures

The US-China trade war began escalating in 2017 with the US initiating investigations into China's intellectual property infringement and forced technology transfer , and fully materialized in 2018 with the imposition of tariffs. The Trump administration pursued aggressive trade policies aimed at reducing trade deficits and protecting domestic industries.  

Key Tariff Imposition Dates and Magnitudes (US vs. China):

• March 2018: The US imposed tariffs on Chinese steel and aluminum under Section 232 of the Trade Expansion Act. China retaliated by imposing tariffs on 128 US agricultural and livestock products.   
• July 6, 2018 (1st Round): The US imposed a 25% tariff on $34 billion worth of Chinese imports. China also implemented a 25% retaliatory tariff on $34 billion worth of US goods.   
• August 23, 2018 (2nd Round): The US imposed an additional 25% tariff on $16 billion worth of Chinese imports. China responded with a 25% retaliatory tariff on $16 billion worth of US goods.   
• September 24, 2018 (3rd Round): The US imposed a 10% tariff on $200 billion worth of Chinese imports. China imposed differentiated tariffs of 5-10% on $60 billion worth of US imports.   
• December 2, 2018: Both countries agreed to a temporary truce, postponing the increase of the 3rd round tariff from 10% to 25% for 90 days.  
• May 10, 2019 (4th Round): The US increased tariffs on $200 billion worth of Chinese imports from 10% to 25%, citing China's retreat from negotiation commitments.  
• May 13, 2019: China announced an increase in tariffs on $60 billion worth of US imports from 5-10% to 5-25%, effective June 1, 2019.   
• August 1, 2019: President Trump threatened to impose a 10% tariff on an additional $300 billion worth of Chinese products.  
• August 6, 2019: The US officially designated China as a 'currency manipulator'.  

This timeline demonstrates that the US-China trade dispute expanded beyond simple trade imbalances to a broader economic and technological hegemony competition. Both countries exerted mutual pressure through a repetitive cycle of tariffs and retaliatory measures. However, temporary truce agreements indicated that both sides recognized the economic costs of the trade war and sought negotiated solutions. Yet, the re-escalation in May 2019 revealed that fundamental structural issues (such as intellectual property protection and state-owned enterprise subsidies) remained unresolved, signifying that the trade conflict was the prelude to a larger economic and technological rivalry. This pattern suggests that even if future trade disputes are temporarily managed, they can reignite at any time as long as fundamental disagreements persist.   

Table 1: Key US-China Tariff Imposition Timeline (2018-2019)

Date	US Measures (Tariff Rate & Volume)	China's Retaliatory Measures (Tariff Rate & Volume)	Key Event/Context
2018.03	Tariffs on steel/aluminum	Tariffs on 128 US agricultural products, etc.	-
2018.07.06 (1st Round)	25% tariff on $34B Chinese goods	25% tariff on $34B US goods	Trade war officially begins
2018.08.23 (2nd Round)	25% tariff on $16B Chinese goods	25% tariff on $16B US goods	-
2018.09.24 (3rd Round)	10% tariff on $200B Chinese goods	5-10% tariff on $60B US goods	-
2018.12.02	Agreed to 90-day delay of 3rd round tariff increase to 25%	-	Temporary truce
2019.05.10 (4th Round)	Tariffs on $200B Chinese goods increased from 10% to 25%	-	Citing China's retreat from negotiations
2019.05.13	-	Tariffs on $60B US goods increased from 5-10% to 5-25% (effective 2019.06.01)	-
2019.08.01	Threatened additional 10% tariff on $300B Chinese goods	-	-
2019.08.06	Designated China as 'currency manipulator'	-	-

B. Relative Strength of USD and CNY

The US-China trade war significantly impacted the USD/CNY exchange rate, generally leading to a depreciation of the Chinese Yuan against the US Dollar. Yuan depreciation was particularly pronounced at the time of tariff impositions. For example, on August 5, 2019, shortly after President Trump threatened additional tariffs on August 1, China allowed the Yuan to cross the psychological threshold of 7 Yuan per dollar (破七, 'Poqi'). This was the largest depreciation (1.44%) since August 2015. 

This movement of the Yuan was widely interpreted as reflecting the People's Bank of China's policy intention to allow depreciation in response to US tariffs. This signaled China's willingness to use its currency as a strategic tool in the trade dispute. The Yuan's 'Poqi' implied that China had largely abandoned expectations for a trade agreement with the US and that future US-China trade negotiations would become more complex.   

On August 6, 2019, the US officially designated China as a 'currency manipulator'. However, this designation was largely seen as politically motivated rather than having significant economic sanction effects. Analysts widely believed that since major tariff measures were already in place, the currency manipulator designation did not substantially increase actual pressure on China. Instead, it exacerbated global risk aversion. Past cases involving Japan, Germany, and Taiwan also showed limited effectiveness of currency adjustments in improving balance of payments imbalances. This analysis demonstrates that currency policy can be a crucial strategic tool in trade wars, but also suggests that symbolic designations alone are unlikely to achieve desired economic outcomes.  

Table 2: Monthly Average USD/CNY Exchange Rate Trends (2017-2021)

Year	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2017	6.88	6.87	6.89	6.89	6.87	6.79	6.74	6.67	6.58	6.62	6.62	6.53
2018	6.44	6.32	6.31	6.30	6.37	6.54	6.75	6.85	6.85	6.93	6.94	6.88
2019	6.77	6.72	6.71	6.72	6.87	6.89	6.88	7.04	7.12	7.08	7.03	6.98
2020	6.93	6.98	6.99	7.07	7.10	7.07	6.99	6.93	6.82	6.73	6.61	6.53
2021	6.48	6.46	6.51	6.53	6.43	6.42	6.48	6.48	6.46	6.42	6.39	6.37

C. Movements of the Korean Won (KRW) and Other Major Currencies (EUR, JPY)

During the US-China trade war, the Korean Won experienced significant volatility and a depreciating trend against the US Dollar. South Korea has a highly export-dependent economic structure, with a particularly high export share to China (26.8%) and the US (12.1%) , making it highly susceptible to the direct impacts of the US-China trade dispute. The Won showed high synchronization with the Yuan, with the phenomenon of rapid co-movement accelerating when the Yuan depreciated. This is due to the direct channel where a slowdown in the Chinese economy leads to reduced demand for Korean intermediate goods, given that intermediate goods exports to China account for 79% of South Korea's total exports to China.  

Table 3: Monthly Average USD/KRW, USD/JPY, EUR/USD Exchange Rate Trends (2017-2021)

Year	Currency Pair	Jan	Feb	Mar	Apr	May	Jun	Jul	Aug	Sep	Oct	Nov	Dec
2017	USD/KRW	1183.49	1141.78	1134.59	1132.98	1125.88	1129.62	1134.30	1131.40	1132.55	1134.22	1103.34	1083.43
	USD/JPY	114.77	113.23	112.56	110.15	111.95	110.96	112.39	109.84	111.45	113.38	112.96	112.91
	EUR/USD	1.066	1.063	1.071	1.077	1.109	1.122	1.146	1.180	1.196	1.179	1.184	1.182
2018	USD/KRW	1070.76	1076.99	1070.16	1071.18	1078.69	1095.34	1120.30	1121.75	1119.53	1133.15	1129.62	1120.30
	USD/JPY	110.87	108.82	105.90	107.57	109.70	109.92	111.41	111.05	111.90	112.56	113.35	112.87
	EUR/USD	1.222	1.233	1.230	1.222	1.184	1.168	1.169	1.157	1.165	1.149	1.137	1.139
2019	USD/KRW	1122.95	1124.08	1130.34	1138.83	1184.81	1169.58	1178.64	1210.00	1197.66	1180.78	1171.74	1165.60
	USD/JPY	108.82	110.37	111.23	111.64	109.89	108.28	108.31	106.27	107.36	108.48	108.97	109.38
	EUR/USD	1.144	1.135	1.130	1.122	1.119	1.129	1.123	1.114	1.101	1.108	1.105	1.113
2020	USD/KRW	1166.75	1190.16	1218.78	1224.23	1228.45	1205.62	1198.81	1186.20	1175.75	1137.95	1110.15	1092.30
	USD/JPY	109.77	109.89	107.96	107.60	107.65	107.47	107.08	106.05	105.51	105.07	104.42	103.95
	EUR/USD	1.109	1.085	1.096	1.084	1.088	1.127	1.151	1.182	1.182	1.177	1.185	1.217
2021	USD/KRW	1099.90	1109.76	1132.89	1118.84	1117.42	1114.73	1148.60	1165.00	1174.00	1184.00	1185.00	1185.00
	USD/JPY	103.74	105.39	108.68	109.14	109.18	110.10	110.31	109.84	110.11	113.06	114.02	113.79
	EUR/USD	1.214	1.211	1.191	1.205	1.219	1.203	1.181	1.176	1.177	1.160	1.139	1.129

Trade Diversion Effects and Spillovers:

The US-China trade war had complex effects on the Korean economy. On one hand, the imposition of US tariffs on Chinese goods led to a 'Trade Diversion Effect' in some product categories, creating opportunities for Korean products to replace Chinese goods in the US market. In Q1 2019, US imports of sanctioned items from China decreased by 24.7%, while US imports of the same items from South Korea increased by 20.5%. This was particularly evident in sectors where Korea has a competitive edge over China, such as automobiles, semiconductors, home appliances, mobile phones, and plastic/rubber products. This phenomenon indicates that South Korea could partially benefit from US sanctions against China in specific industries.  

However, the situation in the Chinese market was different. In Q1 2019, China's imports of sanctioned items from the US decreased by 36.9%, but China's imports from South Korea also decreased by 5.9%. This suggests that the overall slowdown in the Chinese economy and reduced demand for intermediate goods offset any trade diversion effects. In other words, as US tariffs led to a contraction in China's income and domestic demand, South Korea's exports to China decreased even more significantly. This clearly demonstrates South Korea's vulnerability to the overall contraction in global trade and the economic slowdown of major trading partners due to the US-China trade dispute.  

This situation indicates that the Korean Won is deeply intertwined with the dynamics of the US Dollar and Chinese Yuan. South Korea's high reliance on foreign trade amplifies the Won's volatility during US-China trade tensions. While trade diversion effects in the US market increased demand for certain Korean products, the overall slowdown in the Chinese economy and reduced demand for intermediate goods negatively impacted South Korea's exports to China. This means that despite some opportunities for South Korea to capitalize on the trade dispute, the overall contraction of the global trade environment and the economic slowdown of major trading partners exerted continuous downward pressure on the Won. Therefore, beyond benefiting from specific sectors, South Korea needs a multifaceted response strategy to changes in global supply chains and the economic trends of major economic blocs.

D. Broader Economic Impacts of the First Trade War

The US-China trade dispute extended beyond mere tariff impositions, having widespread effects on the global economy.

Impact on Global GDP and Trade Volume:

The trade dispute increased uncertainty for economic actors worldwide, dampening corporate investment and household consumption, which negatively impacted global GDP. The International Monetary Fund (IMF) estimated that the US-China trade war could reduce global GDP by $450 billion (0.5 percentage points) in 2020. Furthermore, the IMF predicted that global trade volume growth would slow from 5.2% in 2017 to 4% in 2019, and the World Bank projected global economic growth to decelerate from 3.8% in 2018 to 3.5% in 2019. In 2018, global stock markets experienced declines: China by 25%, Japan by 14%, Europe by 15%, and the US (Dow Jones) by 5.6%.  

Impact on Corporate Investment and Global Supply Chains:

Concerns about global supply chain disruptions led to widespread postponement of production and investment decisions in the US and China. The semiconductor industry, in particular, saw a deepening slowdown after a two-year boom due to escalating global trade tensions. The trade dispute incentivized Chinese manufacturers to increase production in third countries like Vietnam to avoid US tariffs , which contributed to the long-term restructuring of existing global supply chains and increased international economic volatility.   

Moreover, US sanctions on Huawei, a key aspect of the technology hegemony competition, slowed Huawei's growth while creating opportunities for Korean companies. For instance, Samsung Electronics gained a rebound effect by taking the lead in the 5G telecommunications equipment market, surpassing Huawei. These non-tariff barrier measures, in addition to the direct impact of tariffs, brought fundamental changes to companies' long-term investment strategies and supply chain structures.  

This progression shows that while tariffs were a direct tool of the trade war, their impact extended beyond changes in tariff revenue or trade volume to broader systemic shocks, including increased uncertainty, reduced investment, and structural restructuring of supply chains. Companies began to consider supply chain stability and geopolitical risks beyond mere cost optimization, accelerating the re-evaluation of global production networks and decoupling in the long run. This suggests that the first trade war acted as a catalyst for permanent changes in the global economic architecture, forming a new paradigm where security and geopolitical alignment become more crucial in supply chain decisions than pure efficiency.

IV. Outlook for Trump's Potential Second Term: Policy Expectations and Currency Implications

A. Expected Trade and Economic Policies of Trump 2.0

Trump's second term is expected to further strengthen the 'America First' stance and pursue aggressive trade policies focused on direct containment of China. This is likely to be executed with greater precision and meticulousness than during his first term.   

High-Intensity Tariff Policy and Potential Revocation of MFN Status:

One of the core pledges of Trump 2.0 is to impose a minimum 60% tariff on all Chinese imports, with up to 200% on automobiles. This level is significantly higher than the tariffs imposed during his first term, with some analyses suggesting it could lead to a 0.7-2.5 percentage point decline in China's economic growth. Furthermore, efforts to legislate the revocation of China's Permanent Normal Trade Relations (PNTR) status, which is the basis for Most Favored Nation (MFN) treatment, are likely to intensify. This would signify a fundamental shift in US-China trade relations. While there is also a pledge to impose a universal baseline tariff of 10-20% on all imports, its feasibility requires further discussion due to potential legal challenges under current trade laws.   

Fiscal and Monetary Policy Outlook:

• Fiscal Policy: The Trump 2.0 administration is expected to focus on large-scale tax cuts (income and corporate tax reductions) as a short-term economic stimulus. Given the current excessive US fiscal expenditure and the four-year term limit, this suggests a focus on boosting purchasing power through tax cuts rather than significant increases in fiscal spending. Extensions of the 2017 Tax Cuts and Jobs Act (TCJA) and further corporate tax reductions (from 21% to 15%) are possible.  
• Monetary Policy: Trump has repeatedly expressed dissatisfaction with the Federal Reserve (Fed), suggesting that he will favor appointees aligned with his policy philosophy when selecting the next Fed Chair after 2026. This could increase uncertainty regarding future Fed monetary policy. The intensity and frequency of Fed criticism through media and social media (SNS) are expected to increase, and in some cases, the possibility of dismissing the Fed Chair could arise, necessitating caution regarding increased financial market volatility.  

Supply Chain Restructuring and Industrial Policy Changes:

Trump 2.0 is likely to strongly push for the reshoring of manufacturing to the US (onshoring) and production in neighboring countries (nearshoring). This could shift from providing incentives to attract foreign companies to increasing tariffs on imports to induce domestic production. Furthermore, the administration is expected to abolish 'non-economic value-based regulations' such as environmental regulations, strengthen support for symbolic manufacturing sectors like steel and automobiles, and strictly apply import restrictions. While Trump holds a negative stance on the Inflation Reduction Act (IRA) and the CHIPS Act, outright repeal might be difficult due to Republican support in Congress. Instead, the administration may indirectly weaken their effectiveness through intentional delays in implementation or stricter criteria for foreign companies to receive subsidies. 

This policy stance of Trump 2.0 signifies a deepened economic nationalism that prioritizes economic self-reliance and national security, going beyond mere trade deficit reduction. It aims for a fundamental reconfiguration of global trade and supply chains, with a higher likelihood of unpredictable policy decisions and market interventions. This approach could create a more interventionist and uncertain environment outside traditional economic frameworks. Consequently, it could lead to rising global inflation and persistent supply chain disruptions, ushering in a new era where geopolitical alignment increasingly dictates trade and investment flows.

B. Expected Impact on USD, CNY, KRW

US Dollar (USD): Strong Dollar Trend Expected to Persist

A 'strong dollar' scenario is widely anticipated under a Trump 2.0 presidency. Several factors are likely to support dollar strength:  

• Fiscal Expansion: Large-scale tax cuts could necessitate increased government bond issuance to finance fiscal expansion. This would lead to rising bond yields, attracting foreign capital to the US and increasing upward pressure on the dollar.  
• Protectionism and Global Economic Slowdown: Widespread tariff imposition and the spread of protectionism could suppress economic growth outside the US and contract global trade volume. In such global uncertainty, the US dollar's appeal as a safe-haven asset will be further highlighted, increasing its demand. Reduced dollar supply due to protectionism could also contribute to dollar strength.  
• Interest Rate Environment: If Trump's policies, such as tariff increases and immigration restrictions leading to reduced labor supply, exacerbate inflationary pressures, the Fed may be forced to slow the pace of interest rate cuts or maintain higher interest rates. This would provide additional support for dollar strength.  

Chinese Yuan (CNY): Additional Depreciation Pressure and China's Strategic Response

The Chinese Yuan is expected to face significant depreciation pressure due to Trump 2.0's high-intensity tariff policies. New tariffs (expected to be 54-60%) would directly hit China's export-oriented economy, leading to reduced foreign exchange earnings, which could further deepen the Yuan's depreciation. Yuan depreciation could exacerbate downward price pressures and deflation within China, potentially dampening domestic consumption.   

China's strategic responses to this are likely to include:

• Expanding Domestic Market: To offset declining exports, China will actively pursue policies to strengthen its domestic consumption base.  
• Technological Self-Reliance: China will increase research and development (R&D) investment in key technology sectors like semiconductors and artificial intelligence, strengthening its technological innovation capabilities to reduce reliance on foreign countries.   
• Strengthening Regional Economic Cooperation: Through the Regional Comprehensive Economic Partnership (RCEP) and the Belt and Road Initiative, China will deepen economic cooperation with Asian and other regions, diversifying trade and investment channels. 
• Yuan Internationalization: China will continue efforts to expand Yuan settlement in international trade and increase currency swap agreements to reduce dollar dependence. The expansion of Yuan-denominated crude oil futures trading on the Shanghai International Energy Exchange, for example, could pose a threat to the petrodollar system.  

Korean Won (KRW): Increased Volatility and Depreciation Risk, Potential for Selective Spillovers

The Korean Won is expected to face high volatility and depreciation risk amidst increased global economic uncertainty and renewed US-China trade tensions under a Trump 2.0 presidency. South Korea's high external dependence makes its economy particularly vulnerable to such external shocks. A strong dollar environment will naturally exert downward pressure on the Won.  

• Potential for Selective Spillovers: Similar to the first trade war, if the US significantly increases tariffs on Chinese products, certain Korean items (e.g., automobiles, semiconductors, batteries, machinery) could partially benefit by replacing Chinese products in the US market. However, these advantages are likely to be offset by the overall contraction in global trade and reduced Korean intermediate goods exports due to the Chinese economic slowdown. Furthermore, there is a risk that low-priced Chinese products entering other markets (a 'balloon effect') could reduce the competitiveness of Korean products.  
• Domestic Economic Impact: A weaker Won could drive up domestic import prices, eroding consumer purchasing power and leading to a contraction in domestic demand. Increased costs for raw materials and intermediate goods imports could lead to reduced corporate investment, negatively impacting South Korea's economic growth. Given South Korea's high reliance on exports, a worsening global trade environment could lead to a domestic economic downturn.  

These forecasts suggest that the US Dollar and Chinese Yuan are likely to move in different directions. A strong dollar trend is expected to persist due to US fiscal expansion and safe-haven demand, while the Yuan will likely face significant depreciation under high tariff pressure. The Korean Won will face complex challenges between these two major currencies. While it may find opportunities through trade diversion effects in specific industries, the overall decline in global trade volume and the direct impact of Yuan depreciation are expected to exert significant downward pressure on the Won. Although China will pursue diversified response strategies, including domestic-led growth, technological self-reliance, and regional cooperation, unprecedented US tariffs will heavily burden the Yuan, inevitably affecting the Won. Therefore, South Korea must prepare for prolonged currency volatility and potential Won depreciation, requiring multifaceted strategic efforts such as diversifying export markets and products, and strengthening domestic economic fundamentals.

C. Broader Global Economic and Geopolitical Implications

Trump's second term is expected to bring even more severe structural changes to the global economic and geopolitical landscape.

Accelerated Protectionism, Inflationary Pressures, Financial Market Volatility:

Trump's re-election will accelerate the global spread of protectionism, and other developed and emerging economies may also intensify similar protectionist measures. High tariffs will increase import prices, forcing companies to pass additional costs on to consumers, which could lead to overall inflationary pressures. Furthermore, reduced labor supply due to immigration policies could further exacerbate inflationary pressures.  

Increased uncertainty in US monetary and fiscal policies, coupled with a worsening global trade environment, could sharply increase volatility in international financial markets. Concerns about a 'Trump storm' and an overheated US market (e.g., Buffett Indicator, Shiller's CAPE Ratio) suggest the possibility of a sharp market correction, which could trigger a global recession.   

Multipolarization of International Order and Accelerated Supply Chain Restructuring:

The US-China trade war will deepen the multipolarization of the international order. Countries will seek to reduce their reliance on existing unstable global supply chains and explore new trade alliances, potentially leading to fragmentation of the global economy. In the long term, global value chains (GVCs) will be fundamentally restructured, with resilience, security, and geopolitical alignment becoming more important than pure cost efficiency. This signifies a shift towards an era of 'deglobalization' or 'slowbalization,' characterized by higher production costs, reduced trade volumes, and increased geopolitical risks.  

These complex impacts suggest that escalating protectionism, potential inflation, and increased financial market volatility will create a more fragmented and unstable global economic environment. This is not merely a cyclical downturn but a structural change driven by geopolitical competition. The restructuring of supply chains and the push for economic decoupling mean that the efficiency gains of globalization are being sacrificed for national security and economic resilience. This foreshadows a world where trade and investment decisions are increasingly influenced by political rather than purely economic considerations. Therefore, businesses and governments must adapt to a new paradigm characterized by higher costs, reduced trade volumes, and increased geopolitical risks, where strategic insight and agile response mechanisms are paramount.

V. Conclusion and Strategic Recommendations

A. Key Summary

During Trump's first term, the US-China trade war led to significant depreciation of the Chinese Yuan, and the Korean Won experienced increased volatility with high synchronization to the Yuan. South Korea gained some spillover benefits from trade diversion in certain product categories in the US market, but was generally negatively affected by the contraction in global trade and the slowdown in the Chinese economy.

Trump's potential second term is expected to further strengthen 'America First,' signaling aggressive trade policies such as high tariffs on China and the revocation of MFN status. This is projected to solidify the strength of the US Dollar and exert severe depreciation pressure on the Chinese Yuan. The Korean Won will face continuous volatility and further depreciation risks amidst this strong dollar and weak Yuan trend. The broader global economy will confront challenges including accelerated protectionism, increased inflationary pressures, heightened financial market instability, and structural restructuring of supply chains.

B. Strategic Recommendations for South Korea

In this complex and challenging global economic environment, South Korea needs multifaceted efforts to transform potential risks into strategic opportunities.

1. Establish a Proactive Scenario-Based Response System: A robust and effective public-private response system must be built to prepare for various scenarios of US tariff expansion and global trade disruptions. This should include developing tailored countermeasures for each scenario, training experts in the US market, and fostering close cooperation and information sharing among government agencies, related organizations, and businesses.   

2. Diversify Markets and Products: To reduce high export dependence on the US and China, South Korea must actively pursue diversification of export markets towards high-growth potential emerging markets such as ASEAN and India. Simultaneously, the export structure, currently centered on intermediate goods, should be upgraded to focus on high-value-added advanced technology products to enhance competitiveness and reduce vulnerability to external shocks.   

3. Strengthen Domestic Economic Fundamentals: Recognizing the limitations of an export-led growth model, efforts are needed to strengthen the economy's domestic demand base through revitalizing domestic consumption and investment. The soundness of domestic financial and asset markets should be reinforced, and monitoring of speculative capital inflows and outflows should be enhanced to prepare for international financial market volatility.  

4. Strategic Trade Diplomacy and Supply Chain Resilience: Against the backdrop of spreading protectionism, South Korea must advocate for free trade principles and strengthen multilateral cooperation through international organizations. Particularly in key industries like semiconductors and batteries, South Korea should actively promote its potential as an alternative to China and strengthen supply chain partnerships with the US and other friendly nations. Support for reshoring production networks from China to ASEAN or domestically should be provided to secure supply chain resilience. 

5. Accelerate Technological Innovation and Self-Reliance: In an intensifying US-China technology hegemony competition, continuous expansion of R&D investment in advanced industries such as artificial intelligence, semiconductors, and biotechnology is crucial to strengthen technological innovation capabilities. This is essential for securing long-term competitive advantages and reducing technological dependence on specific countries.  

This comprehensive approach will help South Korea successfully navigate the complex and challenging global economic landscape shaped by the new trade policies of a potential Trump 2.0 administration, and transform potential risks into strategic opportunities.