South Korea and the United States struck a massive deal to lower prospective US tariffs on South Korean imports to 15 percent from a proposed 25 percent, in exchange for $350 billion of South Korean investment in the US, leaders of the two countries said Thursday.
"We've overcome a major hurdle," President Lee Jae Myung noted on his Facebook Thursday as he confirmed the deal, saying it had removed uncertainties on Korea's export front.
"Despite the tight deadline and challenging conditions, the government dealt with the negotiations, considering our national interest the top priority," Lee also said. "By adjusting US tariffs on par with or below those of our major export competitors, we have created an environment in which we can compete on equal or superior terms with them."
Kim Yong-beom, director of national policy at the presidential office, said in a briefing Thursday that the tariff cut to 15 percent would also be applied to cars, freeing South Korea-made automobiles from Trump's 25 percent sector-specific tariffs. Kim added South Korean semiconductor chips and biopharmaceutical products will also be under the most-favored-nation treatment.
Kim expressed some regret about the outcome, because the South Korean side had pushed for a 12.5 percent tariff on automobiles, instead of 15 percent, given that South Korean cars have until now been exempted from tariffs under the free trade agreement. Cars from Japan and the European Union, which recently reached similar deals with the US, will also be subject to 15 percent tariffs.
As for the $350 billion investment vehicle, the South Korean presidential office said it would focus on supporting South Korean companies dedicated to shipbuilidng, chipmaking, secondary batteries, biotechnologies and energy.
Lee said the fund would "lay the foundations for ties in strategic industries of the two countries," adding that a fund amounting to $150 billion would focus solely on the shipbuilding sector.
Most of South Korea's future investment will be made in the form of either loans or guarantees, while equity investment will likely account for less than 5 percent, said Kim, adding the investment would go to projects selected by Trump, without confirming what they would be. Kim also said Seoul has had all the procedures for talks recorded in the form of a memorandum.
South Korea recorded a trade surplus of 66 billion with the US through 2024, apparently one reason Trump had sought a 25 percent "reciprocal" tariff on most South Korean goods, excluding those subject to sectoral tariffs to narrow the US trade deficit.
Meanwhile, Trump described the deal on his Truth Social on Wednesday as "full and complete." He added that South Korea would purchase more US energy, including liquefied natural gas, and import more US cars, trucks and agricultural goods.
Kim said the agreement will not involve any further opening of South Korean markets for rice and beef. Kim also said the announced purchase of liquefied natural gas "came at a conventional level" considering the size of South Korean economy, adding that the additional US gas import would potentially involve an adjustment of its imports from the Middle East.
Further details of the trade talks remain unclear. There was no mention of these aspects or what type of arrangements they referred to in Lee's statement, and Kim did not mention details of any plan to increase US automobile imports.
Trump also said that the South Korean president would visit the White House within the next two weeks for a bilateral meeting, adding that he would "like to congratulate the new president on his electoral success."
If this materializes, this would be Lee's first trip to Washington since his inauguration in June.
Lee's aide Kim said the timing of Lee's visit to the White House was being coordinated through diplomatic channels of the two countries.
About a couple of hours before the announcements, Lee Kyu-youn, senior presidential secretary for public relations and communication, notified that South Korean delegations were meeting Trump and the deal could be finalized, reversing Seoul's announcement Wednesday night that Finance Minister Koo Yun-cheol and Trade Minister Yeo Han-koo will hold talks with their counterparts US Treasury Secretary Scott Bessent and US Trade Representative Ambassador Jamieson Greer Thursday night Washington time.
consnow@heraldcorp.com
