“Washington Can’t Have it Both Ways: Tariffs on Allies and the China Trade War”

Chad Bown, the Reginald Jones Senior Fellow at the Peterson Institute for International Economics (PIIE), emphasized in an interview with Kyunghyang Daily News, that the only real trade war the U.S. needs to fight is with China. He stressed that it is important for Washington to work with like-minded partners to address China’s growing market dominance in key sectors, but pointed out that the Trump administration’s tariff campaigns on allies and trade conflicts with countries like Canada could undermine this effort. While he expected tariffs to remain as a main feature of U.S. economic statecraft, he noted South Korea’s strengths in critical industries including chips, batteries and shipbuilding, which are essential to the world economy and serve as alternatives to Chinese products.

Bown, a renowned expert on international trade policy, has served as chief economist at the U.S. Department of State and as a senior economist on the White House Council of Economic Advisers. He co-authored a new book, ‘How to Win a Trade War’, with Soumaya Keynes, and is the host of the popular Trade Talks podcast.

By Yoojin Kim, Industry News Reporter

Editor’s note: This is a full transcript of the interview published exclusively by the Kyunghyang Daily News. Excerpting the entire or any part of the text without consulting the interviewee or the editor is strictly prohibited.

(Click here for Korean version)

Chad Bown, the Reginald Jones Senior Fellow at the Peterson Institute for International Economics (PIIE), poses during an interview with Kyunghyang Daily News in Seoul, August 31st of 2026. Photo Credit: Yoojin Kim

Q. In your recent New York Times op-ed, you argued that China may be the ultimate winner of intensifying U.S.-Canada trade conflict.

A. There are lot of trade wars going on right now. Most of them were initiated by President Trump, and most do not make much sense. The one trade war that does need to be fought right now is to deal with China’s growing market dominance across a lot of sectors. Part of the response has got to be the U.S. working with like-minded countries that have the same concerns with China, and getting them to do similar things toward China, whether raising tariffs, using subsidies, or industrial policy.

Right now we’re renegotiating the trade agreement with Canada and Mexico, and President Trump’s focus seems to be, through the use of his tariffs, to get more manufacturing in the U.S., even at the expense of manufacturing in Mexico, and especially Canada. However if you take away all manufacturing from Canada‘s automobile sector, by puting tariffs on Canadian cars, auto parts, steel, and aluminum, Canadian consumers would not want to buy more expensive cars built in America, without benefits in terms of local parts or assembly. They are just going to buy the cheaper vehicles from China.

Unless you allow other partners to have some benefits of the manufacturing sector too, they will not go along with our plan on China. China has 1.4 billion consumers, but the U.S. only has 340 million. We need to add Canada, Europe, Korea, and Japan, all of us, to have the possibility of competing in scale with China. By fighting with Canada, essentially, we’re making both of ourselves weaker in the bigger trade fight with China.

Q. Trump seems to be more interested in dealmaking with China, rather than coming up with a coordinated and collective response with like-minded countries on China.

A. The U.S. is not large enough by itself to tackle the problem that China poses. It would also be a lot cheaper for us if we share the costs of taking on China; the costs of incentivizing companies to create new supply chains out of China, through subsidies as the Trump administration is doing now for companies to do mining and processing for critical minerals so that we’re not as dependent on China. Tariffs impose costs on Americans, but if we have other countries that are having similar kinds of policies, they can share in those costs with us. Americans alone would not bear the burden of creating these alternative supply chains outside of China, so that we’re not vulnerable to acts of Chinese coercion.

Q. I think your argument may have some resonance with President Trump, since he demands greater burden sharing among allies. But there are concerns that tariffs are eroding traditional security alliances, just as we are seeing with the escalation of U.S-Canada conflict.

A. President Trump isn’t wrong about everything. We have to treat this burden sharing differently, given the new costs to deal with these new threats and to fight this new kind of trade war. A lot of America’s trading partners and allies have been very hesitant to do anything about the China problem, just expecting the U.S. to handle it. But Chinese export restrictions in 2025 on rare earth permanent magnets and Nexperia export restrictins impacted automotive supply chains in Europe, Japan, and Korea. Hopefully everyone has woken up to the serious threat.

The problem is, while countries have been woken up to that threat, they’re spending most of their time having to deal with the threat that President Trump is imposing on them through tariffs.

Q. On U.S.-ROK relations, tensions are ongoing over Korea’s pledges to invest in the U.S., the issue of Coupang. Now Samsung Electronics and SK Hynix are faced with growing pressure to expand memory production in the U.S.

A. It is challenging because Korean companies have already made tremendous investments in the U.S. over the last five years, with the CHIPS Act and the Inflation Reduction Act.

Memory is a special industry at a special moment in time, with the AI boom and the shortage of memory. Korean companies have made commitments to do big investments expanding their production capacity, mainly here in Korea. Certainly, the American government would like them to do some of that in the U.S.

Q. What realistic policy and business options does South Korea have to manage the U.S. demands for investment in memory facilities?

A. When it comes to security and resilience of supply chains, there could be arguments for doing more prodction in the U.S. or outside of Korea. As with TSMC in Taiwan, too much production of one thing in one geographic location can be really risky. Taiwan is subject to earthquakes, and now with climate change, there are typhoons, droughts, wildfires, and all kinds of risks to geographically concentrated production. The same risks to some extent apply to Korea. You do want to have a little bit more diversification, even though that’s going to be more expensive.

Whether that should be part of this deal with the Trump administration, there’s a big question about whether that deal is a good deal in the first place. But there are definitely arguments for partners and allies to better align their policies together to make sure that they’re doing things in a coordinated fashion so we’re not competing with each other.

We are worried that Chinese firms might enter the memory space. Chinese firms already have a growing presence in low-end legacy chips and logic space, and a growing presence in assembly, test, and packaging. The fact that Nexperia wafers manufactured at facilities in Europe had to be flown back to China for packaging and finishing is what gave the Chinese government the ability to impose those export restrictions last year. Still, it’s going to take three to five years before those facilities would come into operation, so it’s not going to resolve the memory shortage problem that we have today.

Q. On the artificial intelligence sector, there have been reports that the U.S. will request that allies and partners sever ties with China in terms of artificial intelligence cooperation. How should Korea respond to such a request?

A. Keep in as close communication with the U.S. administration as possible, because it’s been a little bit unclear what their ultimate objectives are.

The first Trump administration was the first to impose export controls on SMIC to address concerns about Chinese AI chip manufacturing capacity and the Biden administration went further. But then the Trump administration last year has loosened some controls to allow China to purchase some of the NVIDIA chips. The administration’s view seems to be that a way to slow the indigenous Chinese ecosystem is to flood their market with the better NVIDIA chips. Allies have to ask Washington what the policy actually is, because of potential inconsistencies. For Korea, that has significant equities and expertise, educating them about blind spots is super important.

Q. What kind of anticipation do you have for the U.S.-China summit? Do you think they would extend to some kind of a trade truce again, or would they go on the course of conflict?

A. I have very modest expectations. Trade statistics show China is not buying a whole lot more U.S. farm products, as part of the $200 billion deal from Trump‘s first term. The U.S.-China Board of Trade, as the Ambassador Greer talked about, could lower tariffs for non-sensitive products, on $30 billion worth of stuff. Given all the other tariffs imposed, China could paradoxically end up getting lower tariffs than other countries.

However, these are very minor because China has incredible leverage over rare earths and permanent magnets, which can potentially shut down the U.S. automotive industry. Until we find alternative sources of supply, China maintains this leverage and you cannot put tariffs in place to diversify away from China.

Q. On rare earths, some middle-powered countries and the U.S. are interested in initiatives to partner with other countries so they could lower dependence on China. Do you think that kind of effort will work out?

A. When I listen to Prime Minister Carney or others talk about the middle powers approach, it sounds like they want to continue to have free trade or rules-based trade with all those other countries, when all of those countries already have really low trade barriers toward China.

To create alternative supply chains for mining, refining rare earths and other critical minerals and manufacturing permanent magnets where China has over 90% of the world’s supply, you have to create incentives for massive investments. Right now those companies don’t have those incentives, because China will instruct its state-owned firms to start dumping minerals on world markets, driving down prices and making those investments unprofitable. The only way is through subsidies, price guarantees, price floors, or tariffs on Chinese products. Until middle powers get serious about those questions, I don’t see how that solves the problem, because they can still be coerced by China. Canada was hit by those Nexperia export restrictions, and Honda had to shut down some of its production in Canada.

Q. Is the U.S. leadership of any sort essential in achieving the goal set forth by middle power countries?

A. I think it makes more sense to do it with the U.S., but it also requires the U.S. to put an attractive deal on the table. I do not criticize the Canadians, Mexicans, or Koreans for saying to the U.S. that they can’t work with them on this issue because the U.S. is hitting them with tariffs. The U.S. can’t have it both ways: the U.S. can’t expect those countries to do the hard policies too, but also be hitting those countries with tariffs and imposing additional costs on them.

Q. Do you think tariffs will remain as a core element of U.S. economic statecraft regardless of electoral shifts, like in the midterm elections or government changes?

A. Normatively, a tariff targeted against China for those products is a tool of economic statecraft that can help create the incentive for companies to generate alternative sources of supply.

The positive question of whether the tariffs likely remain is yes, because it’s going to be very difficult politically for the next administration to remove many of the tariffs. One, if these tariffs, both the forced labor tariffs and the upcoming tariffs on overcapacity, remain in place, they will bring in some revenue for the U.S. government. It’s not enough to close the deficit, but still enough that it will be very difficult to get rid of them without replacing them with some other form of revenue. In the U.S. political system, unless you have all three parts of the U.S. government lined up with the same party at the same time and prioritizing tax reform, it is very difficult.

The other is the difficulty with the forced labor tariffs. To get rid of them, a politician would have to make an argument proposing to remove tariffs placed on a country for forced labor, which immediately triggers public pushback over excusing forced labor. That’s a political argument that most politicians are not going to want to engage in.

Q. That would mean that a country like Korea, heavily reliant on exports, has to learn how to live in the world with constant tariffs.

A. President Trump is fighting ten trade wars at the same time, when only the one with China is one that needs to be fought. The general idea that trade wars are here to stay in one form or another is an unfortunate new reality, which makes it very complicated for countries like Korea that are very heavily dependent on exports.

The good news is, Korean companies make things that are essential. Imagine you didn’t have Samsung and SK making memory chips for AI. Korea makes stuff that the world needs right now, and you’re going to get slightly better treatment than a lot of other countries out there because of that. Korean battery companies and shipbuilding are the world’s leaders outside of China, too. Oftentimes, it’s Korean companies that are providing those alternatives.