Korea eyes LNG imports from US to avert Trump's tariff threats

Korea Herald

17-02-2025

Trade minister heads to Washington for tariff talks, with LNG imports topping the agenda as bargaining chip
The South Korean government is likely to propose increasing imports of liquefied natural gas from the United States as a quid pro quo to maintain zero tariffs on Korean-made automobiles, steel and aluminum under the second Trump administration.
According to industry sources on Monday, Deputy Trade Minister Park Jong-won will visit Washington, DC, from Monday to Friday to meet with senior officials from the Department of Commerce and the US Trade Representative. The visit aims to gather details on Trump's tariff plans and convey Korea's stance on the matter. Later this month, Industry Minister Ahn Duk-geun is also expected to visit the US for negotiations with his American counterparts, including Howard Lutnick, the nominee for Secretary of Commerce.
While the US has not specified its tariff plans for Korea, Trump announced that, starting March 12, a 25 percent tariff will be imposed on steel and aluminum imports from all countries, with automobiles potentially facing tariffs from April. Notably, Korea has benefited from zero tariffs on cars since 2016, with the US market accounting for 49.1 percent of Korea's automobile export revenue as of last year.
Industry insiders expect the Korean government to use LNG imports from the US as a bargaining chip to neutralize potential tariffs, particularly on automobiles. Aligned with his strategy to expand domestic oil production, Trump has vowed to increase natural gas exports by easing regulations on local producers.
Following Trump's push for increased LNG exports, the state-run Korea Gas Corporation, which manages roughly 80 percent of the country's LNG imports, is reportedly considering selecting several US LNG producers as preferred bidders for long-term supply contracts.
If Korea replaces its decadeslong supply agreements with Qatar and Oman, which ended late last year, with US contracts, the import value is projected to reach approximately $4.6 billion. This figure represents 8.3 percent of Korea's $55.7 billion trade surplus with the US from the previous year, signaling a potential reduction in the US trade deficit. Korea has imported an average of 8.98 million tons of LNG annually from the Middle East since the 1990s.
'If Korea becomes a key trade partner in LNG, Trump could possibly walk back on his tariff plans for the country,' said Kim Tae-hwang, an international trade professor at Myongji University. 'Japan has already entered into an import agreement with the US, and the EU is currently in discussions to do the same. Korea's Industry Minister is likely to use LNG imports as leverage in discussions with US officials.'
Despite the potential trade benefits, significantly boosting LNG imports could impose additional costs on Korea's energy companies, which would need to convert power plants from oil to LNG.
However, Kim emphasized that alternative options for increasing US imports, such as agricultural products, are limited.
'We already import a significant amount of agricultural products from the US,' Kim said. 'Further raising that number could be challenging due to competition with Australia and potential backlash from local farmers.'
Kim also recalled that Korea used the LNG strategy during negotiations with the first Trump administration as the US sought to reduce its trade deficit with Korea. However, the deal did not materialize, as it was set aside during the Biden administration, which temporarily paused LNG terminal expansions.
Hwang Yong-sik, a business professor at Sejong University, echoed Kim's view, highlighting that a long-term LNG deal could benefit both nations.
'The LNG contract is a long-term deal of at least 10 years,' Hwang noted. 'If Korea could guarantee that to the US, it could be a boon for Trump's initiative to revitalize the LNG industry — an integral contributor to the US economy.'