Trump's tariff letter to Korea raises both pressure, cautious hope for trade deal

White House Press Secretary Karoline Leavitt shows a signed letter on tariffs from U.S. President Donald Trump to Korean President Lee Jae Myung during a press briefing at the White House in Washington, D.C., U.S., Monday. Reuters-Yonhap

WASHINGTON — U.S. President Donald Trump's letter on a steep tariff plan for Korea heaped more pressure on Seoul to make concessions in trade talks but raised cautious hope for the Asian country to pursue a breakthrough through an extended negotiation deadline, analysts said Monday.

Trump unveiled the letter addressed to Korean President Lee Jae Myung on Monday, saying that the United States will start imposing 25 percent tariffs on Korean products on Aug. 1 — rather than Wednesday when the "reciprocal" tariffs were supposed to kick in following a 90-day pause.

Analysts called on Korea to concentrate on making proposals to support the U.S.' efforts to rebuild and strengthen its manufacturing capacity in key areas, including shipbuilding and chip production, while underlining the importance of in-person engagements with the Trump administration.

In April, Trump rolled out the reciprocal tariffs to address foreign trade barriers to U.S. exports. But he paused them until Tuesday to allow time for negotiations.

"This missive points to a possible intention by Trump to keep trade negotiations with Korea open, offering a potential adjustment that delays the imposition of full-scale tariffs," Tom Ramage, economic policy analyst at the Korea Economic Institute of America, told Yonhap News Agency via email.

"Doing so buys time for Korea to find a solution regarding trade, and for the U.S. to pursue consensus on a range of outstanding issues such as U.S.-Korea LNG investment, alleviation of digital trade barriers in Korea, and restrictions on the import of U.S. beef," he added. LNG is short for liquefied natural gas.

Trump shared the letter on Truth Social, when Korea's National Security Adviser Wi Sung-lac and Trade Minister Yeo Han-koo were in Washington amid Seoul's cranked-up diplomacy to avoid or minimize the impact of the reciprocal tariffs and sector-specific duties on automobiles, steel and aluminum.

"In this context, the letter applies greater pressure to negotiations at hand as well as those still ahead, setting the stage for the next phase of dealmaking with the Korean government," Ramage said.

Troy Stangarone, former director of the Hyundai Motor-Korea Foundation Center for Korean History and Public Policy at the Wilson Center, described Trump's letter as a "negotiating tactic" to raise pressure on Korean negotiators to reach a deal.

But he challenged Trump's continued claim in the letter regarding America's trade deficits stemming from Korea's tariffs on American goods.

"While the U.S. has had a persistent trade deficit with Korea, most tariffs were eliminated under the KORUS FTA and aren't really a factor driving the trade deficit," he said, referring to the free trade agreement between the two countries.

"The letter is right to point out that there are non-tariff barriers, but those are not the most significant factor in the trade deficit."

Behind the move to add pressure was a sign of the Trump administration's appetite to cut a deal with Korea, a treaty ally that has much to offer in terms of economic and industrial cooperation.

In trade talks with Washington, Seoul has repeatedly underscored its desire to forge a "mutually beneficial" partnership for a "manufacturing renaissance," as the countries seek to sharpen their industrial edge in the artificial intelligence, semiconductor and other strategic areas.

"The nature of the letter to some extent suggests the priority Korea has as a trade partner of the U.S., meaning Korea, as well as Japan, were important enough to warrant extending implementation of the original tariffs past the July 9 deadline," Ramage said.

"Korea plays an out-sized role in strategic industries for the United States, such as semiconductor production, shipbuilding, and battery technology. If anything, the mention of a possible adjustment suggests that the U.S. has an appetite to get a deal done, rather than leaving the tariffs where they are at 25 percent."

On Monday, the Trump administration sent letters not only to Korea, but also to Japan and about a dozen others. In the letter to Japanese Prime Minister Shigeru Ishiba, Trump said the U.S. will start charging a tariff of 25 percent on Japanese goods on Aug. 1 — a rate 1 percentage point higher than what he initially announced in April.

In her commentary, Wendy Cutler, vice president of the Asia Society Policy Institute and former negotiator of the Korea-U.S. FTA, said that Trump's letter suggests the U.S. will not be open to reprieves from the Section 232 sectoral tariffs, including on autos, a high priority for both Korea and Japan.

To impose the tariffs on automobiles and certain parts, Trump invoked Section 232 of the Trade Expansion Act of 1962 — a statute that provides the president with authority to adjust imports into the U.S. when he determines they threaten to impair national security.

The auto tariff issue has been high on Seoul's negotiation agenda. Of Korea's total car exports last year, exports to the U.S. were tallied at $34.7 billion, or 49.1 percent. Hyundai Motor Group and GM Korea exported around 970,000 and 410,000 units to the U.S., respectively, last year.

"While the news is disappointing, it does not mean the game is over," Cutler said. "We cannot rule out a breakthrough in negotiations in the lead up to August 1, when the additional tariff hikes are to take effect."

In particular, the trade expert underscored the importance of strategic cooperation with Korea and Japan on various fronts in an apparent message to U.S. trade negotiators.

"Both have been close partners on economic security matters and have a lot to offer the United States on priority matters like shipbuilding, semiconductors, critical minerals and energy cooperation," she said.

"Moreover, companies from both countries have made significant manufacturing investments in the U.S. in recent years, bringing high-paying jobs to U.S. workers and benefiting communities all around the country. And both countries are important markets for an array of U.S. goods and services, including beef, pork, medical devices and planes."

With the negotiation deadline weeks away, analysts advised Seoul to hammer away at its efforts to highlight what it can provide to support Trump's economic priorities at the negotiating table.

"Korea should focus on filling gaps in U.S. industrial capacity such as shipbuilding and military industrial capacity," Stangarone said. "Through a combination of investment in the U.S. and production in Korea to fill U.S. gaps, the two sides can reach a mutually beneficial agreement."

Ramage emphasized the need to continue engaging with the U.S. face to face.

"The Korean government should continue to value face-to-face diplomacy with the Trump administration, which — as evidenced by the recent deal with the United Kingdom — highly values direct dealmaking and 'win-win' cooperation," he said.

"In this context, new investments announced with the United States should be done with public optics in mind, and the Korean government should take note of United States' expectation for major openings to be created for U.S. businesses in the Korean market."

For the administration of new Korean President Lee, the trade negotiation is the first crucial test to his diplomatic policy, which he has cast as a "pragmatic" one that values the Seoul-Washington alliance as its "foundation."