South Korea to step up US trade talks before tariffs kick in on Aug 1

SEOUL – South Korea said it planned to intensify trade talks with the US and considered President Donald Trump’s plan for a 25 per cent tariff from Aug 1 as effectively extending a grace period on implementing reciprocal tariffs.

US Secretary of State Marco Rubio said the new deadline, as set out by Mr Trump in a letter addressed to South Korean President Lee Jae Myung, meant there was still time for countries to work out an agreement, Mr Lee’s office reported later.

Mr Trump said on July 7 that he would impose the tariff on goods from South Korea starting on Aug 1, posting the letter to President Lee on his Truth Social platform, along with one to Japan’s leader.

South Korea’s Industry Ministry said in a statement that the letter effectively extended a grace period on the implementation of reciprocal tariffs by the US.

“We will step up negotiations during the remaining period to reach a mutually beneficial result to quickly resolve the uncertainties from tariffs,” the ministry said.

“We also plan to use it as an opportunity to improve domestic systems and regulations to resolve the trade deficit that is a major interest of the United States and advance key industries through a manufacturing renaissance partnership between the two countries,” it added.

South Korea earned a record surplus of US$55.6 billion (S$71 billion) from trade with the US in 2024, up 25 per cent from 2023, led by rising car exports, according to Korea Customs Service data.

Mr Trump said in the letter to Mr Lee that “our relationship has been, unfortunately, far from reciprocal”, inviting South Korea to present a proposal to open “your heretofore closed trading markets” and eliminate tariff and non-tariff barriers.

South Korea’s effective tariff rates stand at near zero under a free trade agreement first signed in 2007, then revised in 2018 under Mr Trump’s first term, according to economists.

South Korea’s top trade envoy and the country’s presidential security adviser have travelled to the United States in recent days for trade and defence talks as Asia’s fourth-largest economy raced to seek an exemption from Mr Trump’s threatened tariffs.

National Security Adviser Wi Sung-lac met Mr Rubio in Washington on July 7 to discuss the countries’ alliance and ongoing trade negotiations, and agreed that a summit meeting between Mr Lee and Mr Trump would help advance cooperation, Mr Lee’s office said.

“Tariff letters to major trading partners, including South Korea, were sent out today, but there is still time until tariffs are implemented on Aug 1, so he hopes the two countries can communicate closely to reach an agreement before that,” Mr Lee’s office cited Mr Rubio as saying.

Mr Trump also appeared to indicate that he was open to negotiation.

Asked if the deadline was firm, Mr Trump said: “I would say firm, but not 100 per cent firm. If they call up and they say we’d like to do something a different way, we’re going to be open to that.”

South Korea was slow to negotiate for an exemption from Mr Trump’s tariffs, first agreeing to work out a package deal but holding “technical discussions” before moving to high-level negotiations after Mr Lee took office on June 4.

Mr Lee won a snap election after his predecessor’s December 2024 martial law declaration, which he said had greatly impaired the country’s response to US trade policy and new tariffs.

The Industry Ministry in the statement conceded it did not have enough time after the start of a new administration in South Korea to reach an agreement with the US on all issues despite intense negotiations.

The US is South Korea’s second-largest export destination after China, accounting for 18.7 per cent of outbound shipments worth US$127.8 billion in 2024.

The Office of the US Trade Representative said the country ran a US$66 billion trade deficit with South Korea in 2024, its eighth-largest bilateral gap. That was bound to draw the attention of Mr Trump, who has framed persistent trade shortfalls as a national emergency.

Failure to secure a deal during the extended grace period is set to deepen the drag on a trade-dependent economy that shrank in the first quarter.

Exports remain vital to South Korea’s economy, equivalent to more than 40 per cent of gross domestic product in 2024. Its supplies of chips, smartphones, cars and batteries are also key elements for global supply chains. REUTERS, BLOOMBERG