Korea offers ‘MASGA’ project to avert tariffs

Industry Minister Kim Jung-kwan, right, shakes hands with U.S. Commerce Secretary Howard Lutnick during their meeting in Washington, D.C., Thursday (local time). Courtesy of Korean Ministry of Trade, Industry and Energy

Korea's industry minister has made a surprise proposal to his American counterpart for a joint initiative aimed at revitalizing the U.S. shipbuilding industry — a last-ditch effort to avert the imposition of a 25 percent tariff on Korean imports, set to take effect this Friday.

The Ministry of Trade, Industry and Energy said Monday that Minister Kim Jung-kwan proposed the project, titled "Make American Shipbuilding Great Again" (MASGA), to U.S. Commerce Secretary Howard Lutnick. The name appears to pay homage to U.S. President Donald Trump’s signature slogan, "Make America Great Again."

Kim met with Lutnick at the latter’s residence in New York on Friday (local time) and proposed the project, which is estimated to be worth tens of billions of dollars. The initiative includes capital investments by Korean private shipbuilders in the United States, along with financial support from Korean state-run banks.

Deputy Prime Minister and Minister of Economy and Finance Koo Yun-cheol, meanwhile, will travel to Washington on Tuesday for tariff talks with U.S. Treasury Secretary Scott Bessent on Thursday (local time).

The U.S. government has consistently praised Korea’s shipbuilding capabilities and has repeatedly signaled its desire to attract major Korean shipbuilders to invest in the United States as a way to revitalize the American shipbuilding industry. In May, U.S. Trade Representative Jamieson Greer met with HD Hyundai Executive Vice Chairman Chung Ki-sun and Hanwha Ocean CEO Kim Hee-cheul separately on Jeju Island to discuss the bilateral partnership.

While shipbuilding has stood out as Korea’s exclusive and strongest bargaining chip for its tariff talks with the U.S., the Korean presidential office on Saturday said the strategy may save the negotiation by leading the two countries to agree on a mutually beneficial partnership.

Kim, after meeting with Lutnick, flew to Europe where the Trump administration's key trade aides, including Bessent and Greer, had gathered to negotiate with the Chinese government. The high-level talks betwen Washington and Beijing were set for Monday and Tuesday (local time) in Sweden.

A vessel is under construction at HD Hyundai Heavy Industries' Ulsan Shipyard in Ulsan, Dec. 29, 2023. Courrtesy of HD Hyundai Heavy Industries

Kim’s trip to Europe sparked speculation that the Korean delegate aims to hold additional talks with key U.S. economic officials to maintain momentum from his previous meetings with Lutnick in New York and Washington.

Also on Monday, the presidential office said Trade Minister Yeo Han-koo and the industry minister will hold additional meetings with Lutnick and Greer for further talks. Foreign Affairs Minister Cho Hyun will also head to Washington to meet U.S. Secretary of State Marco Rubio this week, the office added.

President Lee Jae Myung urged the country's key diplomatic aides to "do their best serving the Korean interests," according to the presidential office.

Last year, Korea built 242 ships — liquefied natural gas carriers, large crude carriers, advanced container ships and eco-friendly vessels running on alternative fuel — totaling 11.5 million compensated gross tonnage (CGT). Over 97 percent of the ships were for export. During the first half of this year, Korean shipbuilders accounted for 3.81 million CGT building over 100 ships, or 24 percent of global orders, second only to China.

The U.S., meanwhile, last year produced five large ocean merchant vessels and commissioned two new naval vessels. The country accounted for 0.04 percent of the commercial shipbuilding output worldwide that year.

Korea’s shipbuilding capabilities are being viewed as a key bargaining chip that could set the country apart from Japan and the European Union, both of which last week successfully negotiated a reduction of U.S. tariffs to 15 percent by offering substantial financial commitments. Japan pledged $550 billion in investment to the U.S., while the EU committed $600 billion.

Industry experts, however, speculate that Korea’s greenfield investment proposal — valued at over $100 billion plus additional incentives — may be more beneficial to U.S. interests by strengthening its domestic manufacturing base through technological advancement rather than financial incentives.

Seoul currently aims to finalize a trade agreement with Washington before the Aug. 1 deadline to reduce the 25 percent "reciprocal" tariff and sector-specific duties imposed on Korean goods.

The reciprocal tariffs were initially implemented on April 9, but were suspended by Trump for 90 days to allow for negotiations. Washington then indicated plans to resume enforcement of the tariff starting Aug. 1 unless a deal is reached.