ED More favorable terms for Korea
Trade Minister Yeo Han-koo arrives at Dulles International Airport near Washington, D.C., July 22. Yonhap
'Reciprocal' tariffs should be under 15 percent
Faced with little time ahead of the Aug. 1 tariff deadline, top Korean ministers are descending en masse in Washington, D.C., to work on a deal to reduce the Trump administration's 25 percent "reciprocal" tariff as well as other sectoral tariffs. These deals could possibly involve more defense cost sharing and cooperation in shipbuilding and semiconductor manufacturing, among other concessions.
Finance Minister Koo Yun-cheol and top trade envoy Yeo Han-koo will meet their U.S. counterparts, Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer, for talks on Friday. New Foreign Minister Cho Hyun and Industry Minister Kim Jung-kwan will also engage in bilateral trade talks. As they departed Korea, news came of Japan reaching a deal to reduce the tariffs to 15 percent while increasing access to some U.S. cars and agricultural products. The industry minister said that Seoul will be closely watching Japan's agreement. Car-related shares immediately rose on the Seoul bourses as well.
Korea's negotiation team should press aggressively for better terms than Japan received, because its advantages in manufacturing sectors such as shipbuilding, semiconductors and power plants are strong incentives for the United States. Korea's trade surplus with the U.S. stood at $55.6 billion in 2024, while Japan's was $70 billion. Leading Korean conglomerates have made direct investments in the U.S., for example the $21 billion investment announced in April by Hyundai Motor.
A broad set of nontariff conditions is reportedly coming from the U.S., asking Seoul to remove quarantine measures for American agricultural products, rules to regulate online platforms and a ban on high-precision map data stored on overseas servers. Also on the negotiating table are the import of beef from cattle aged 30 months or more and rice. Seoul negotiators should be able to put some of the regulations on online platforms and the ban on high-precision map data going overseas on the table. The highly sensitive issue of further opening the beef and rice markets is not on Seoul's list of offers for negotiation, but crops for fuel are reportedly being reviewed. Already, the nation's farmers are up in arms. Negotiations need not stir up social instability.
Bessent stressed on CNBC that the most important thing for the U.S. will be the "quality of the deal." He also said, "We will see what the president will do" when asked whether the tariff deadline will be extended for nations in active discussion. But U.S. Commerce Secretary Howard Lutnick reiterated that Aug. 1 is a hard deadline. These are seemingly contrasting statements coming from U.S. officials.
National Security Adviser Wi Sung-lac and a bipartisan group of Korean lawmakers, all of whom are already in Washington should coordinate their messages this week.
The United States is enacting its "America first" policy in the realm of tariff negotiations, but it should not overlook the fact that it requires strong economic and defense partners like Korea to retain dominance in the areas of technology, economics and geosecurity.
That said, trade matters such as tariff negotiations usually require considerable time and bilateral dialogue before an agreement can be reached. Given this, Korean negotiators must accurately, and with precision, assess the myriad U.S. demands issued over time. Getting our fingers on the right U.S. pulse will be challenging. Seoul must draw upon all of its past experiences in trade negotiations to first determine which core demands it can accept and which need further discussion. From there, the negotiations must be highly targeted with the aim to achieve the nation's best interests.
As for the U.S., it needs to take into account the value of its traditional alliance with Korea as a significant security and economic partner. It should also consider that any excessive demands, especially in the farm and livestock sectors, will trigger severe repercussions against U.S. interests in the long term. It needs a reminder of the nightmarish mad cow disease situation in the late 2000s that seriously undermined people's trust in the Lee Myung-bak government and fanned anti-American sentiment.