Japan's tariff deal with US puts pressure on Korea over agriculture imports, Alaska gas project

People in Tokyo react as they read a special edition of Yomiuri Shimbun newspaper reporting the tariff deal between the United States and Japan, Wednesday. Reuters-Yonhap

Korea is facing growing pressure to increase American agricultural imports and participate in an Alaska gas development project in its tariff negotiations with the U.S., as Japan accepted these U.S. demands in return for lower “reciprocal” tariffs and sector tariffs on cars.

As Seoul’s top negotiators prepare for scheduled talks with their U.S. counterparts on Friday, they now have a mission to cut the Donald Trump administration’s planned levy of 25 percent tariffs on Korea to Japan’s level or lower, to maintain the competitiveness of Korean companies.

Washington and Tokyo reached a deal to reduce reciprocal duties on Japanese products to 15 percent from 25 percent. U.S. tariffs on Japanese cars also dropped to 15 percent from 27.5 percent, although the rate for steel and aluminum products remains unchanged at 50 percent.

The deal came as Tokyo agreed to increase U.S. rice imports and invest in the Alaska liquefied natural gas (LNG) pipeline project as a preparatory step toward buying LNG from the U.S. state. Trump said Tuesday (local time) that Japan would also open itself to trade including cars and trucks.

“Japan will invest, at my direction, $550 billion into the United States, which will receive 90 percent of the profits,” he wrote on social media.

Japanese Prime Minister Shigeru Ishiba said the new reciprocal tariff rate is the lowest figure among nations running trade surpluses with the U.S.

If Seoul fails to reach a deal with Washington by Aug. 1, Korean exports to the U.S. will face 25 percent duties, potentially losing market share to lower-priced Japanese goods, as Japan is its chief rival in the U.S. automotive and industrial markets.

Korean cars are still subject to the 25 percent item-specific tariff, leaving Seoul’s negotiators with the challenge of lowering the rate below 15 percent at the “two-plus-two” high-level trade talks in Washington scheduled for Friday.

The presidential office said Wednesday that the government is trying to learn more details about the U.S.-Japan agreement, with a plan to take them into account in its own negotiations.

Industry Minister Kim Jung-kwan told reporters the same day that he was carefully reviewing how the U.S.-Japan tariff deal will affect Korea’s negotiation strategy.

“Given the significant impact these tariff negotiations could have on our economy, the government will respond thoroughly while carefully evaluating sensitivities across different industries,” he said before departing for Washington to meet with U.S. Commerce Secretary Howard Lutnick, Energy Secretary Chris Wright and Interior Secretary Doug Burgum, who leads the U.S. National Energy Dominance Council.

Trade Minister Yeo Han-koo, right, arrives at Washington Dulles International Airport in Dulles, Va., Tuesday (local time), ahead of the upcoming high-level tariff talks between Korea and the United States on Friday. Yonhap

Trade Minister Yeo Han-koo, who arrived in Washington on Tuesday (local time), pledged to “do everything we can” to reach a trade deal. Yeo will attend the two-plus-two meeting with Deputy Prime Minister and Finance Minister Koo Yun-cheol alongside U.S. Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer.

Rep. Na Kyung-won of the main opposition People Power Party, leading a delegation of Korean lawmakers in Washington, told reporters Tuesday (local time) that U.S. politicians most frequently raised concerns about Korea’s proposed regulations on monopolistic online platforms and trade barriers to agricultural imports.

“I felt the need for us to provide something concrete,” she said.

Along with Japan, the United Kingdom, Vietnam and Indonesia have agreed to increase U.S. agricultural imports in exchange for lower tariffs.

Amid protests from local farmers over potential agricultural concessions, however,
rumors have circulated that Seoul has decided not to discuss larger-scale purchases of U.S. rice or imports of U.S. beef from cattle over 30 months of age during the forthcoming high-level talks. Instead, the government is reportedly considering a proposal to increase corn imports to use them as biofuel.

The presidential office declined to confirm whether the rumors were true, while relevant ministries asked the press to refrain from reporting on unconfirmed rumors.

Regarding the Alaska LNG project, Korea has been cautious about joining the investment, due to uncertainties over its profitability.

Trade experts advised Korea to learn lessons from Japan’s concessions.

“It will likely be difficult for Korea to finalize a tariff deal with the U.S. unless the government follows Japan’s example,” said Lee Tae-kyu, a senior research fellow at the Korea Economic Research Institute. “Japan managed to cut tariffs to 15 percent by making concessions in several sectors and investing at a large scale.”

Kim Jung-sik, a professor of economics at Yonsei University, also advised the government to consider increasing imports of U.S. beef or apples to help curb domestic inflation.

“Korea should also give serious thought to joining the Alaska LNG project,” he said.

With U.S. pressure mounting, investors are betting on Seoul’s ability to persuade Washington to lower auto tariffs, as Tokyo did.

Buoyed by the optimism, share prices of Hyundai Motor and Kia both jumped on Wednesday. Histeel, Dong Yang Steel Pipe, Nexteel and Husteel also saw notable increases, as these steel pipe manufacturers are expected to become beneficiaries if Korea participates in the Alaska LNG project.