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NHK
5 days ago
- Business
- NHK
How South Korea forged US tariff deal
South Korea reached a trade agreement with the United States just ahead of the August 1 deadline. US tariffs will be set at 15 percent, the same rate as those levied on Japan and the EU. NHK World's Kitai Genki spoke with an expert about the background and implications of the deal. Patrick Cronin, Asia-Pacific Security Chair at the Hudson Institute, praised the outcome of the negotiations between the two nations. "I think it's excellent that South Korea was able to reach an agreement under these very difficult circumstances in a period of eight weeks after this new administration has taken office." Patrick Cronin, Asia-Pacific Security Chair, Hudson Institute Due to domestic political instability, South Korea was late in initiating the tariff negotiations. Cronin pointed out that the country benefited from a "second-mover advantage," having observed Japan's earlier deal. He noted that Seoul's deal closely mirrors Tokyo's, especially in key areas like automobile tariffs. "The South Korean government wanted to at least achieve the same results, say on autos, auto tariffs that the EU and Japan, had so that they didn't feel disadvantaged. I think the biggest sticking point at the end was the amount of the investment." 'Make America Shipbuilding Great Again' In a strategic move just ahead of the deadline, Seoul proposed a 150 billion-dollar shipbuilding initiative called "Make America Shipbuilding Great Again," a play on words of US President Donald Trump's campaign slogan. The shipbuilding outlay is in addition to 200 billion-dollars of Korean investment into the US for "investment, loan, and loan guarantees in strategic industries related to economic security such as semiconductors, nuclear power, batteries, bio, and core minerals," according to a government press release. South Korea brought custom-made 'MASGA' hats to Washington for negotiations. The heads of some of the country's largest global companies, including Hyundai Motor Group and Samsung Electronics, reportedly converged on Washington, D.C. to show support for their government's negotiators. South Korean officials emphasized the relatively modest size of the total package. Kim Yong-beom, South Korean presidential chief of staff "Our investment commitment ended up being smaller than Japan's," said Kim Yong-beom, South Korean presidential chief of staff for policy. "Excluding shipbuilding, the 200 billion-dollar investment amounts to just 36 percent of Japan's." Patrick Cronin "There is domestic concern inside South Korea, as you may know, that the full amount of potential investment that South Korea is talking about exceeds their current reserve. So they want to downplay the total number, and I understand that for political reasons." President Lee Jae-myung and Trump are expected to hold a summit this month. Cronin predicted the meeting may be more than just ceremonial. "I would expect there to be opportunity for some initial proving on both alliance issues – for instance, about the forthcoming defense review that could bring force structure changes. But also…on aligning North Korea policy on thinking about outreach to Kim Jong Un." Cronin said he does not expect concrete outcomes on tougher issues, but he sees the summit as a starting point for deeper dialogue. US, South Korea joint military drills Broader strategic concern Cronin said the US deals with South Korea and Japan may serve as a foundation for deeper cooperation. But with rising competition and shifting alliances, the road ahead remains complex. He also noted that while US ties with key allies like Japan and South Korea remain strong, nations in Southeast Asia are increasingly turning toward Beijing as a hedging strategy. "The Asian allies, especially in Southeast Asia, are famous for seeking hedging strategies that make sense…Middle powers have to fend for their autonomy and interests as major powers compete, and that's understandable. I think the United States is losing some opportunity with these upheavals that we are helping to create. We're giving China kind of an easy pass on some of its behavior. It now looks like it's the more predictable, stable, stabilizing force. And I don't think that's accurate."
Korea Herald
05-08-2025
- Business
- Korea Herald
Korea, US strike last-minute tariff deal, but tough talks lie ahead
Seoul warns 'devil in the details,' as specifics on $350b investment, digital trade barriers remain unresolved A very last-minute tariff deal between South Korea and the US brought some relief to Asia's fourth-largest economy last week, lowering threatened import duties on Korean products from 25 percent to 15 percent just before the Aug. 1 deadline. However, the deal is widely regarded as a framework, with many specifics yet to be ironed out. There also remain discrepancies between the two sides, particularly in nontariff barriers in the digital and agricultural sectors. These details will need to be resolved through follow-up negotiations. Under the agreement reached in Washington on July 30, Korea was able to avert the initial 25 percent levy in exchange for Seoul's commitment to $350 billion in investments in the US and a $100 billion purchase of American liquefied natural gas and other energy products. Tariffs for Korean cars and auto parts were also dropped from 25 percent to 15 percent. Seoul also received most-favored nation treatment for key sectors like semiconductors and pharmaceuticals, which had been at risk of future tariff hikes. There is no written agreement yet, according to Trade Minister Yeo Han-koo, who was part of the negotiating team, noting that Seoul cannot be fully relieved as either tariff or nontariff pressures could arise at any time. Koo Yun-cheol, deputy prime minister and finance minister, said the real challenges lie ahead: 'As people say, the devil is in the details.' 'We plan to establish a concrete strategy based on the framework established in this agreement and respond proactively in the upcoming detailed negotiation with the US,' Koo said. What's in $350 billion investment One of the major flash points includes specifics of the ambitious investment pledge. Under the agreement, Seoul committed to establishing a $350 billion investment fund, with $150 billion earmarked for the US shipbuilding sector, under a proposal dubbed 'Make America Shipbuilding Great Again.' The remaining $200 billion fund will go toward strategic sectors such as chips, batteries, biotechnology and nuclear energy. But the structure and operation of the investment fund remain unclear, with both countries appearing to have diverging interpretations, raising the potential for disagreements down the road. When revealing the deal in a social media post, Trump said the $350 billion investment from South Korea would be 'owned and controlled by the United States, and selected by myself, as President.' Adding to this, US Secretary of Commerce Howard Lutnick said 90 percent of the profits from the $350 billion investment would be 'going to the American people.' In contrast, Seoul said the fund would primarily consist of loans and loan guarantees, with only a small portion allocated for direct investment. The plan also includes protective measures like purchase guarantees to mitigate risks. In a press briefing on Thursday, Kim Yong-beom, presidential chief of staff for policy, acknowledged that with the fund's structure unspecified ― particularly regarding who will invest, how much and where ― it is difficult to infer the US' exact position. Regarding Lutnick's "90 percent profit" comment, Kim said Seoul interpreted it to mean the profits from the fund would be 'reinvested' in the US, instead of immediately being taken out as dividends, and would remain circulating in the American economy. He added that the idea of the US keeping 90 percent of the profits when the money came from Korea is 'hard to understand in a civilized society.' This 'uncertain' nature of the fund was also a major concern among experts. Yoo Myung-hee, a former trade minister who led free trade agreement renegotiations with the US during Trump's first term, described the fund as unprecedented. 'The investment fund is a path we haven't taken before. There is still uncertainty about how this fund, which hasn't been done in FTAs, trade or bilateral agreements, will operate going forward,' Yoo said at a forum hosted by the Federation of Korean Industries on Tuesday. 'The remaining important task is to carefully flesh out the details in a way that truly benefits both countries.' Lee Jae-min, a professor of law at Seoul National University, echoed that view, saying that "there are many ambiguous parts" to the deal. 'I don't think we've ever seen a trade agreement like this. There are just so many items left for future discussion,' said Lee, noting it was understandable due to the time crunch. 'But what concerns more isn't just the ambiguity, but the fact that the two sides are saying different things.' Lee stressed that follow-up talks need to specify the 'overly broad' concept of investment to determine what qualifies as an investment, and to what extent. The latest agreement sidestepped some of the more contentious topics, including Korea's proposed legislation to regulate online platform companies ― an issue that had been a major point of concern for the US during technical talks ― as well as restrictions on Google's access to high-precision Korean mapping data. But Seoul officials acknowledge that these nontariff barriers could resurface, possibly at the upcoming Korea-US summit expected later this month. The Online Platform Law spearheaded by the ruling Democratic Party of Korea would classify large online platforms as market-dominant operators, empower the Fair Trade Commission to regulate their operations. This would also mean that American tech giants Google and Apple would be subject to stricter regulations in Korea. US companies and lawmakers have been voicing strong opposition to the proposal. Major tech firms have reportedly ramped up lobbying efforts with US legislators and officials, urging them to pressure Korea to shelve the legislation. They argue that the law unfairly targets American firms and constitute a nontariff barrier. The bill is a flagship policy of President Lee Jae Myung's administration and is likely to be enacted given the ruling party's majority in the National Assembly. However, mindful of US sensitivities, the Democratic Party on Monday said it would wait until after the Korea-US summit to decide whether to proceed with the legislation. 'The nontariff barrier issues, including the Online Platform Law, haven't been highlighted much this time, but they will continue to be raised again in the future,' said professor Lee. 'They are long-standing issues that have come up repeatedly during Korea-US talks. Many of these nontariff barriers can be resolved if we proactively explain our position and clear up misunderstandings.' Another contentious issue of Google's push to export Korea's high-precision mapping data was also excluded from the deal, but likely will return in future talks. Washington has been pressuring Seoul to allow Google's access to the data, but Seoul has resisted due to national security concerns. The Korean government was expected to reach a decision on Google's application for the map transfer by Aug. 11, but this deadline will likely be postponed until after the Korea-US summit. Another sensitive topic was whether Korea would further open its market to US agricultural goods, particularly rice and beef. In announcing the deal, Trump said on Truth Social that Korea would be completely 'open to trade' with the US, and accept American products, including agricultural goods. But Korean officials repeatedly ruled out further opening of the rice and beef markets. 'We will not open rice and beef (markets) any further. That is definitive,' presidential chief of staff for policy Kim said during a KBS news program on Sunday. However, he acknowledged that technical discussions might occur, such as talks aimed at simplifying quarantine procedures. Despite the government's efforts to quell concerns, observers say additional US demands cannot be entirely ruled out, considering Washington's strong pressure on Korea to reduce nontariff barriers on agricultural and livestock product.
