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South Korea’s president has expressed pessimism that “very difficult” trade talks with the US can be concluded before Washington’s self-imposed deadline next week to avert steep tariffs, noting that “the two sides are not really clear on what they want”.
South Korea was “doing its utmost” to find a resolution to negotiations triggered by US President Donald Trump’s threat to impose a 25 per cent “reciprocal” tariff on Asia’s fourth-largest economy, Lee Jae Myung told reporters on Thursday.
But he played down expectations that an agreement would be reached before July 9, when paused US tariffs on a host of countries were due to come into force.
“We are actively identifying and developing many agenda items across various areas,” said Lee. “[But] at this point, it is difficult to say with certainty whether they can be concluded” by the deadline.
Lee’s comments came after Trump threatened this week to increase levies on Japan, casting doubt that his administration would reach a deal with Tokyo.
Trump’s threat to increase the “reciprocal” tariffs on Japan to 30 or 35 per cent from the original level of 24 per cent spooked South Korean policymakers, who were hoping for an extension to the deadline.
Trade talks have been delayed for months owing to the political turmoil in Seoul following the impeachment of Lee’s conservative predecessor Yoon Suk Yeol.
According to several people familiar with the talks between US and South Korean officials, Seoul has communicated a willingness to address its record $55bn trade surplus with the US by increasing purchases of American gas and defence equipment and by removing non-tariff barriers publicly criticised by US trade representative Jamieson Greer.
The two countries are also discussing South Korean investments in US shipyards to help revive American shipbuilding, including for the US Navy, as well as a possible Korean commitment to buy gas from a potential new project being promoted by the Trump administration in Alaska.
But one of the people said the talks over shipbuilding co-operation had been complicated by protectionist US legislation preventing foreign involvement in the industry. Korean companies also remain hesitant about committing to the Alaska LNG project, the viability of which has been questioned by energy industry experts, according to several people familiar with the discussions.
The US accounted for 18 per cent of South Korean exports last year, according to OECD figures, with leading exports including cars and auto parts, machinery and intermediate goods to supply Korean companies building car, battery and chip manufacturing facilities in the US.
Unlike Japan, South Korea has a comprehensive free trade agreement with the US under which tariff rates between the two countries should be in effect zero.
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As with Tokyo, South Korea is pushing for the removal of a 25 per cent US tariff on auto imports, which has driven a steep decline in Korean car exports to the US in recent months.
South Korean companies have also been hit by US tariffs imposed on steel and household appliances.
Seoul is also concerned that sectoral tariffs being threatened by the US against chip and pharmaceuticals imports, following investigations that are expected to conclude later this year, could lead to the unravelling of any trade settlement reached this month.
A person familiar with the talks said US negotiators had expressed frustration in recent days that their Korean counterparts were “not being ambitious enough”.
But they added that the Koreans were still confused about what the US side actually wants. “All they know is that whatever it is, the Americans want more.”
