New trade deal

The Korea-United States Free Trade Agreement (KORUS FTA) faces significant uncertainty as the Donald Trump administration is set to seek new trade deals with its trading partners.

U.S. Secretary of State Marco Rubio made it clear on Sunday that the United States will engage in bilateral negotiations on new trade arrangements once its planned reciprocal tariffs take effect on April 2.

His statement reflects on the new U.S. government’s plan to reshape the current trade environment to the U.S.’ advantage.

Rubio did not mention Korea specifically, but the U.S.' eighth-largest trade deficit with Korea suggests that Seoul is likely to enter negotiations with Washington, either for a new trade pact or a revision of the FTA signed in 2007.

History is not in Korea’s favor, as Trump previously pressured Korea into revising the FTA to align with U.S. interests during his first term in 2018.

Last year, Korea's effective tariff rate on goods imported from the U.S. was 0.79 percent under the bilateral FTA. However, considering Trump's perception of Korea as an unfair trading partner — driven by his inaccurate claim that Korea's average tariff is four times higher than that of the U.S. — the Korean government must stay prepared for potential challenges.

Moreover, U.S. interest groups have pushed for demands such as the full opening of the beef market for cattle over 30 months old, relaxation of quarantine regulations on genetically modified organisms (GMOs) and removal of big tech regulations, adding further pressure on the Korean government and key industries.

These economic challenges come amid turbulence between the two allies, including the latest development, where Korea belatedly discovered that it was placed in the lowest category of the U.S. Department of Energy's sensitive and other designated countries list in early January for policy reasons. In addition to these moves, should the U.S. revise the FTA, seen as the cornerstone of the two country’s economic alliance, Korea’s national interests could be seriously threatened.

The challenge, however, is that trade negotiations often fraught with friction should ideally be resolved through high-level diplomacy. At the moment, they are complicated by domestic political factors in Korea. A slight consolation is that, despite imposing reciprocal tariffs, the U.S. has publicly expressed its willingness to negotiate with affected countries. Unlike Canada, Mexico and the European Union, the U.S. has not yet directly mentioned Korea as a target, leaving room for potential negotiations.

To prevent Korea from being overwhelmed by the "America First” trade policy, the government needs to demonstrate that Korea is an indispensable partner by proposing a comprehensive, mutually beneficial package to the U.S., based on cooperation in both trade and security.

Leveraging its manufacturing strengths in the shipbuilding, energy, nuclear and military sectors, Korea must enhance industrial cooperation with the U.S. to secure exemptions from proposed tariffs.

On the political front, rival parties are urged to put an end to the blame game over the U.S.' sensitive country designation and work together to restore and activate diplomatic channels with the U.S.

By operating an economic security control tower that coordinates across government ministries and businesses, Korea should develop detailed negotiation strategies for each agenda item and engage in dialogue with the U.S. administration. Only then can it weather the “Trump risk” and protect its national interests.

Kang Seung-woo is the business desk editor at The Korea Times.