No deal yet – South Korea on tenterhooks as Aug 1 US tariff deadline looms

SEOUL – As the clock ticks down to Aug 1, the pressure is on for Seoul officials.

With the White House’s threat of 25 per cent tariffs looming over the horizon, Seoul appears to be left in the dust as other key United States partners, such as Japan, the Philippines and Indonesia, swooped to the finishing line in the nick of time, with deals cobbled on July 22 and 23. 

In contrast, Seoul officials have had doors shut in their faces as planned high-level meetings were scrapped at the very last minute with no clear reasons given.

South Korea’s Trade Minister Yeo Han-koo and newly appointed Finance Minister Koo Yun-cheol were due for a “2+2” meeting with their respective counterparts, US Trade Representative Jamieson Greer and Treasury Secretary Scott Bessent, on July 25, but the meeting was cancelled at the last minute via e-mail, with US officials citing an “urgent scheduling conflict” on Mr Bessent’s part.

South Korean media reports have claimed that Mr Bessent had met Singapore Deputy Prime Minister Gan Kim Yong instead. Mr Gan, who is also Minister for Trade and Industry, was in the US from

July 20 to 26 to deepen trade and tech ties

.

Earlier on July 21, Seoul’s National Security Adviser Wi Sung-lac was left waiting in vain in the West Wing of the White House when a scheduled meeting with Secretary of State Marco Rubio was cancelled after Mr Rubio was suddenly summoned for an urgent meeting with US President Donald Trump. 

Mr Wi, whose talks on the diplomatic track were meant to supplement the economic officials’ consultations, told reporters that he managed to subsequently speak with Mr Rubio over the phone where the latter pledged thorough discussions with Mr Trump along with other trade officials. South Korea’s newly appointed Foreign Minister Cho Hyun had just started work on July 21. 

Whether the meeting cancellations were by design or a coincidence, it is a clear pressure tactic to press Seoul in the critical run-up to the Aug 1 deadline, analysts told The Straits Times. 

Non-resident fellow Troy Stangarone of the Carnegie Mellon Institute for Strategy and Technology told ST the cancellations of the meetings are “a clear effort to increase the pressure on South Korea by reducing the negotiating time”.

“As more countries conclude deals with the US, it will increase the pressure on South Korea and reduce Seoul’s negotiating space,” he said. 

Japan, a manufacturing powerhouse like South Korea and the other partner in the trilateral security partnership with the US, managed to slash tariff rates to 15 per cent from 25 per cent by agreeing to buy more rice and cars from the US. It also pledged an investment of US$550 billion (S$705 billion) in the US.

As a result, the pressure is mounting for Seoul officials to do just as well, if not better. And the US knows this very well.

In a CNBC interview on July 24, US Commerce Secretary Howard Lutnick said he “could hear the expletives out of South Korea when they read about the Japanese deal because the Koreans and the Japanese... they stare at each other”, adding that he was aware how South Korea “very much” wants a deal. 

South Korea had lost much time during the six months of political vacuum after former president Yoon Suk Yeol’s martial law declaration on Dec 3, 2024. 

To make things worse, Washington and Seoul are currently without ambassadors in each other’s capitals – an unprecedented simultaneous diplomatic vacuum that is bad timing for the tariff talks. 

The new administration under President Lee Jae Myung, inaugurated on June 4, has been scrambling to beat the clock and mitigate the impact of the threatened 25 per cent tariffs on its export-driven economy. 

The presidential office in Seoul said on July 26 that it is continuing all-out efforts in trade negotiations, with a series of high-level meetings scheduled in the narrow window leading up to the Aug 1 deadline. 

South Korean media, citing sources in the know, reported that a revised proposal presented by Industry Minister Kim Jung-kwan to Mr Lutnick on July 25 did not yield tangible results, so it is back to the drawing board. 

Mr Kim is said to have presented the proposal to narrow their differences on contentious items, including the US$100 billion investment plan by Korean companies in the US and easing trade regulations on beef and rice imports by Seoul.

However, the proposal falls short of what the US is reportedly seeking, which includes South Korean investments worth US$400 billion, increased energy imports and the easing of digital regulations seen as targeting American digital services providers. 

Former trade minister Yoo Myung-hee, who served from 2019 to 2021, told Seoul-based foreign media on July 24 that South Korea’s position as the top investor in the US among all the US free-trade partner countries, is ironically working against it in the tariff negotiations. “As the top investor country, South Korea makes about US$25 billion of investments every year. This means that South Korea does not actually have a large capacity for additional investments,” she said. 

And Japan’s agreement to a US$550 billion investment plan weakens Seoul’s negotiating position too, said Mr Stangarone. But he pointed out that South Korea still has advantages over Japan – its semiconductor industry capabilities and shipbuilding capacities. 

“Since South Korea cannot put as much investment on the table, it needs to focus on the quality of its investments as well as investment in areas like nuclear power and defence industrial cooperation that Japan didn’t bring to the table,” he said. 

Perhaps not all is lost yet. 

In response to a query from South Korea’s Yonhap News Agency, a White House official presented an upbeat picture, saying that “productive negotiations” with South Korea are continuing, raising hopes that there could still be a breakthrough in the days to come. 

At a press gaggle on July 25 before departing for Scotland where he was set to meet British Prime Minister Keir Starmer to refine the US-UK trade agreement signed on June 26 and also European Union chief Ursula von der Leyen to discuss tariffs, Mr Trump said his office would be sending out some 200 letters in the coming week and that “we are going to charge a lower tariff than I could get. I don’t want to hurt countries”. 

Dr Lee Seong-hyon, a senior fellow at the Washington-based George H.W. Bush Foundation for US-China Relations, is positive that a deal will be struck in time, taking a cue from Mr Trump’s comments that he is giving the EU a “50/50” chance. 

He told ST: “The focus now shifts from ‘if’ a deal will happen to ‘what’ the final terms look like when the announcement is officially unveiled.”