South Korea’s new leader Lee Jae-myung to seek more time for US trade talks

SEOUL - The new South Korean administration will likely make efforts to buy time for US trade talks, as it studies the negotiations of bigger neighbours Japan and China for leverage, according to sources familiar with the ruling party's thinking.

President Lee Jae-myung, who is due to take office hours after

winning the June 3 snap presidential election,

without the usual two-month transition period, said on the eve of the elections that “the most pressing matter is trade negotiations with the United States”.

The future of South Korea’s export-oriented economy will hinge on what kind of deal Mr Lee can strike, with all of his country’s key sectors, from chips to automobiles and shipbuilding, heavily exposed to global trade.

The new President and his liberal Democratic Party government inherit an economy that is expected to grow in 2025 by a grim 0.8 per cent – the weakest since 2020 – and will need to unify a country deeply polarised by ousted president Yoon Suk Yeol’s botched martial law attempt.

South Korea and other countries may face further pressure, as a draft letter seen by Reuters showed the Trump administration wanted countries to provide their best offer on trade negotiations by June 4. A Trade Ministry official declined to confirm if Seoul had received the letter.

But the transition of power after a six-month leadership vacuum provides Seoul with an excuse to slow down its negotiations and observe Washington’s tariff talks with other countries, said lawmakers, officials and trade experts from the Democratic Party.

“The new administration will need to take a fresh look at the overall framework of the negotiations and that will be a buffer to buy time, which the US cannot reject,” said a trade expert who took part in brainstorming for Mr Lee’s trade strategies.

The sources added that the administration may not be able to immediately ask Mr Trump for an extension, and Mr Lee’s top diplomacy adviser has said he sees such a request being considered only after reviewing the progress.

Still, prolonged negotiations by other countries may help to buy Seoul time.

“It will be strategically right to take a wait-and-see stance because the situation is changing within the United States and around negotiations of other countries,” one lawmaker said. 

Strategic silence 

South Korea, a major US ally and one of the first countries to engage with Washington after Japan, agreed in late April to craft a “July package” scrapping levies before the 90-day pause on Mr Trump’s reciprocal tariffs is lifted, but progress was disrupted by continued upheavals in South Korea’s leadership.

Mr Lee has since stressed that there is no need to rush into clinching a deal and that the deadline of July 8 set between Seoul and Washington should be reconsidered.

During his election campaign, he did not make specific comments about contentious issues around the trade talks. That “silence” was a strategic move, a party official said. 

In a statement after his victory, the Korea International Trade Association called for Mr Lee to “respond quickly to the rapidly changing foreign trade order” and to use all of the government’s diplomatic and trade resources to pursue a practical negotiation strategy.

Mr Trump’s across-the-board tariffs on trading partners, including 25 per cent duties on South Korea, have been the subject of ongoing litigation, but remain in place.

Another trade expert said: “For different reasons, China and Japan will be references for us, with the former on the possibility of US policy changes and the latter on how to make moves under a similar circumstance.”  

Japan, another US ally slapped with tariffs of 24 per cent, no longer sees merit in striking a quick deal, unless it is granted an exemption from the 25 per cent product-specific duties on its key industry of automobiles, also a major sector for South Korea. 

China agreed with the US to significantly unwind their tariffs on each other in a 90-day truce signed in mid-May, but Mr Trump last week accused Beijing of violating the agreement and threatened to take tougher actions.  

When it comes to joint responses to US tariffs, there is a higher possibility with Japan than China, two sources said, citing shared interest in energy purchases and auto tariffs.

Mr Lee’s party expects there will be a “two-track” transitional period, with current officials continuing negotiations as the new administration formulates its strategies, according to the official.

Better positioned

Given its strength in key sectors of US interest, such as shipbuilding and technology, some analysts see South Korea as better positioned than others in the region, as Seoul prepares a separate package of industrial cooperation for bargaining power.

Mr Jay Truesdale, a former US diplomat and chief executive of TD International, an advisory firm in Washington, said: “Successful outcomes require offers that support the President’s domestic agenda, and this will be comparatively easy for Korea, given its importance in politically sensitive industries.” 

Ms Kathleen Oh, Morgan Stanley’s chief Korea and Taiwan economist, said: “We believe there may be more channels and enough scope for Korea to work out a deal compared with, let’s say, its exporting peer Taiwan.” 

South Korea has the scope to decrease its trade surplus with the US via more import purchases, while it can also offer to lower tariffs on agricultural products, particularly rice, quoted by Mr Trump as a high tariff example, Ms Oh said.  

But, for the Lee administration, that is all the more the reason it does not have to rush, said the second trade expert. 

“In the worst-case scenario, if tariffs are adjusted after we sign an agreement, that might mean we made unnecessary concessions,” the source said, adding that “it’s not like we don’t have any leverage”. REUTERS