From Washington to Scotland, Korea pursues last-minute deal with US to dodge tariff hit

Korea Herald

29-07-2025

Growth prospects tied to tariff outcome as Seoul fights to avoid blow to exports, investor confidence
With just days remaining before the US imposes steep "reciprocal tariffs," South Korea is ramping up efforts to strike a deal, overhauling its negotiation package and closely shadowing key US officials in the hopes of bringing the rate below 25 percent.
Deputy Prime Minister and Finance Minister Koo Yun-cheol departed for Washington on Tuesday, where he is scheduled to meet US Treasury Secretary Scott Bessent on Thursday. Koo said he will press for a 'mutually beneficial agreement,' pitching sectors such as shipbuilding as a cornerstone of bilateral cooperation.
'We'll explain our programs and explore long-term collaboration, especially in areas like shipbuilding,' Koo told reporters before departure. Top economic officials have fanned out across the US and even followed American negotiators to Scotland in hopes of reaching a deal before US President Donald Trump's tariff-pause deadline set for Friday.
Seoul's 'Make American Shipbuilding Great Again' proposal, reportedly a multibillion-dollar investment plan aimed at revitalizing the US shipbuilding sector, has emerged as a potential breakthrough.
Industry Minister Kim Jeong-kwan and Trade Minister Yeo Han-koo expanded their outreach beyond Washington, flying to Scotland on Sunday to continue talks with US Commerce Secretary Howard Lutnick, who was accompanying Trump abroad.
They held two consecutive days of negotiations with Lutnick on Thursday and Friday last week. The first round took place at the Commerce Department headquarters in Washington, followed by a second meeting at Lutnick's residence in New York.
Lutnick confirmed their meeting in Turnberry in a Fox News interview and said that additional deals might be completed before Friday's deadline. Kim and Yeo appear to have headed directly back to Washington, continuing their pursuit of a deal.
National Security Office chief Wi Sung-lac and Trade Minister Yeo have been in the US since July 20, engaging in both formal and informal negotiations.
Talks initially stalled after a lukewarm response to Korea's first proposal to the US, particularly on non-tariff barriers concerning agricultural imports.
In response, Seoul revised its offer, pledging more than $100 billion in US-bound investments and signaling a more flexible position on agriculture.
Asia's fourth-largest economy is under growing pressure to reach a deal as the US finalizes agreements with other major trading partners.
A US-EU pact announced Sunday capped tariffs at 15 percent, following a similar deal with Japan that included $550 billion in investments and increased US agricultural imports.
Both Tokyo and Brussels secured 15 percent tariffs on key Korean export items such as automobiles and semiconductors, placing Seoul at a disadvantage if it fails to achieve comparable terms.
Failure to secure a deal would deliver a sharp blow to Korea's export-driven economy. The country's gross domestic product grew 0.6 percent in the second quarter, rebounding from a contraction in the first, helped by a pickup in consumer spending and exports. But economists warn that steep US tariffs could reverse those gains, putting pressure on growth in the second half.
Automobiles, its top export to the US, would face a 25 percent tariff while Japan enjoys a 15 percent rate, undermining the competitiveness of Hyundai and Kia and triggering potential ripple effects across auto parts, shipping and employment.
Adding to the pressure, the Trump administration is expected to unveil semiconductor tariffs as early as next month, fueling concern across the chip supply chain, from raw materials and equipment to tech giants.
The outcome could lead to tariffs ranging from 25 to 50 percent, similar to those previously imposed on steel, aluminum and autos.
In a worst-case scenario, Korean firms such as Samsung Electronics and SK hynix, whose high-end memory chips are produced domestically and exported to the US, often via Taiwan, could be severely impacted.
The fallout could extend to financial markets.
'If the steep tariffs go into effect, the Korean currency could tumble and Korean equities may face a correction,' said Park Sang-hyun, an economist at iM Securities.
Citi economist Kim Wook-jin said he still expected a US-Korea trade agreement before the deadline this Friday, citing the precedent set by the US-Japan deal.
'There is a low likelihood that the US will lock in a 25 percent tariff and risk triggering a major economic shock to South Korea. Given the current political climate, the new (Korean) government is unlikely to take an overly aggressive stance on tariffs, and Washington is also seen as motivated to reach a deal,' he said.
He estimates a potential 14 percent effective US tariff rate on Korean goods, assuming 15 percent duties on autos and reciprocal items, with no further hikes on steel, semiconductors or pharmaceuticals.
A successful agreement could lift sentiment and support a rebound. 'If tariffs are lowered, exports could bottom in the third quarter and begin a gradual recovery in the fourth,' said Jeong Yeo-kyung of IBK Securities.
Lee Jung-hoon of Eugene Investment & Securities added that with stronger domestic demand in the second half, Korea could see 1 percent growth this year and return to the 2 percent range in 2025.