US-China-Korea... The Beginning of Top-Down Impoverishment Policies by Major Powers

Even before his inauguration, President-elect Trump is already opening the curtain on a trade war, issuing warnings of tariffs against neighboring Mexico and Canada.

News reports show Canada's Prime Minister rushing to board a flight to the US, while the Mexican President counters that the US will also suffer losses.

I think the Trump administration's decision to start its tariff threats with Canada and Mexico, geographically and politically close neighbors, serves as a warning to other major trading partners (China, Europe, etc.).

As Trump's term begins and the US expands the scope of its trade war, I think countermeasures from other countries will likely fall into these categories:

a) Moderately increase purchases of US energy and agricultural products to reduce the trade deficit and avoid further conflict (South Korea?).

b) If a) fails, simultaneously devalue the national currency to match the tariffs imposed (China?).

c) If neither a) nor b) stops the US tariff offensive and the damage becomes unbearable, engage in an all-out reciprocal trade war (Europe?).

Of particular concern to us is how China will respond to the US economic offensive, especially given the ongoing US-China power struggle.

In the mid-1990s, when China's economy faltered, it implemented a policy of "beggar-thy-neighbor" (근린궁핍화 정책), sharply devaluing the yuan and causing significant harm to exporting nations in Asia.

Some experts point to this 1990s Chinese policy as a contributing factor to the East Asian financial crisis of 1997.

What will happen this time...?

Among the scenarios for China mentioned above (a) and (b), the video below by journalist Park Jong-hoon, released yesterday, elaborates on scenario (c).

The video focuses on the impact on South Korea if the US imposes high tariffs on China, and China responds by sharply devaluing the yuan. I recommend watching it.

If China continues devaluation in response to US tariffs, Japan, on the other hand, may gradually raise its policy interest rate and appreciate the yen, aiming for a long-term unwinding of yen carry trades.

East Asian countries, including South Korea, will face the double whammy of China and Japan's actions...

After listening carefully, you will get a better sense of why the domestic stock market and real estate market are now at a high risk of a rapid collapse.

The current domestic real estate market is a financialized financial product, not the pure "real estate" of the past. The biggest risk to the domestic real estate market is that it will be engulfed by global financial market volatility...