S. Korea clinches US trade deal, but analysts remain cautious amid lack of details
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Protesters during a rally against US President Trump's policy on South Korea, near the US Embassy in Seoul, South Korea, on July 30.
PHOTO: EPA
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SEOUL – After weeks of haggling and even a cross-continental chase, South Korea finally sealed a trade deal with the US, but analysts remain cautious on whether it can be seen as a win for the country.
On July 31, a day before the Aug 1 tariff deadline, US President Donald Trump announced on his Truth Social account
Under the agreement, the earlier-threatened tariff hike of 25 per cent was slashed to 15 per cent, on a par with what Japan and the European Union managed to negotiate with the US just days earlier.
Dr Lee Mun-seob, an economist at the University of California San Diego, told The Straits Times that even though the deal would come as a relief for South Korean companies “at first glance”, details of the deal would bear watching.
“Most of what we know right now is based on the US’ interpretation. We have seen with the US-Japan agreement that the two governments framed the deal quite differently, and those nuances can be important,” Dr Lee noted.
Indeed, while Mr Trump said in his post that South Korea had agreed to “accept American products including Cars and Trucks, Agriculture, etc”, the Blue House’s presidential chief of staff for policy Kim Yong-beom told reporters on July 31 that Seoul did not agree to open its markets in the contentious rice and beef sectors despite the US’ push.
When asked about the discrepancy, Mr Kim said that the presidential office understood Mr Trump’s words as a “political statement” and that “what matters are the talks held with the negotiating officials”.
Details of the deal are to be hammered out in a first-ever summit between the presidents of both countries, which Mr Trump said he expects to happen within the next two weeks.
At the point of the announcement on July 31, what was known was that part of the deal conditions included Seoul’s pledge of US$350 billion (S$454 billion) in investment to be “owned and controlled by the US, and selected by myself”, said Mr Trump in his post without elaborating further.
This is in addition to a promise on South Korea’s part to purchase US$100 billion of liquefied natural gas and other energy products.
Still, the deal has been lauded as a diplomatic coup by the newly elected Mr Lee Jae Myung in a Facebook post soon after Mr Trump’s announcement. Mr Lee said that South Korea has managed to “overcome a major hurdle”, noting that negotiations are never easy, and that “it is important not to seek one-sided gains but to produce mutually beneficial outcomes”.
South Korea was late to the tariff negotiating game as it was in the throes of political chaos following the martial law crisis initiated by former president Yoon Suk Yeol.
Even after Mr Lee was voted in as president in snap elections held on June 3, his administration struggled to obtain the much-needed face time with Mr Trump and his team.
Plans for Mr Lee to meet Mr Trump on the sidelines of the Group of Seven summit in Canada in mid-June did not materialise.
South Korean trade officials who were due for final-stretch consultations in Washington with their US counterparts last week were left reeling from last-minute cancellations
It showed “how much they really want to get a deal done”, said Mr Lutnick in a Fox News interview on July 29.
In comments to the media released after the announcement, former US deputy trade representative Wendy Cutler, who is now senior vice-president of the Asia Society Policy Institute, said South Korean negotiators “had little choice but to work hard to conclude their own trade deal so as not to be disadvantaged in the US market”, especially following the US deal with Japan on July 22.
While details are still “spotty”, Ms Cutler said South Korea’s deal appeared to “check the same boxes” as the agreements that the US had cut with other countries recently.
Apart from the reduced 15 per cent on reciprocal tariffs, South Korea also obtained a 15 per cent tariff for cars, down from 25 per cent.
A key plank of the deal announced on July 31 was shipbuilding investment.
Of the US$350 billion investment pledged by South Korea, US$150 billion was specifically designated for shipbuilding cooperation, Finance Minister Koo Yun-cheol told reporters shortly after the tariff announcement by Mr Trump.
As the world’s second-largest shipbuilding nation after China, South Korea’s expertise is critical to the Trump administration’s ambitions to “Make American Shipbuilding Great Again”, amid intensifying US-China rivalry. China’s shipbuilding industry is said to be 230 times the shipbuilding capacity of the US.
The shipbuilding cooperation between the US and South Korea will not only include building new US ships and cooperation on maintenance, repair and overhaul projects, but also the construction of new shipyards and training of shipbuilding professionals, said Mr Koo.
Non-resident fellow Troy Stangarone of the Carnegie Mellon Institute for Strategy and Technology told ST the shipbuilding proposal is in line with Mr Trump’s key objective of restoring manufacturing in the US.
“Tariffs alone wouldn’t achieve that, which is why the Trump administration has pushed Japan, the EU and now Korea to commit to investment in return for a reduction of the tariffs,” he said.
