South Korea and the United States are set to initiate high-stakes trade negotiations this week as the Asian export giant seeks relief from punitive tariffs imposed by the Trump administration. These tariffs have started to take a significant toll on South Korea’s economy, especially its export sector.
The discussions are scheduled to begin at 8 AM local time on Thursday in Washington, where US Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer will meet with South Korea’s Finance Minister Choi Sang-mok and Industry Minister Ahn Duk-geun, according to Ahn’s office.
South Korea’s Acting President Han Duck-soo emphasized that the country aims to “find a win-win solution” through “calm and serious consultations” during a meeting with senior policymakers on Monday to prepare for the talks. The export-driven South Korean economy is particularly vulnerable to the US tariffs, with recent trade data highlighting the severity of the situation. Preliminary figures released on Monday show a significant 14.3% decline in South Korea’s exports to the US during the first 20 days of April.
The trade talks are seen as vital for stabilizing South Korea’s economy, which has been further strained by a political crisis following former President Yoon Suk Yeol’s failed marital law attempt. With Yoon’s removal from office, South Korea is preparing for a snap presidential election on June 3, leaving the acting president to navigate the negotiations during a period of political uncertainty. Lee Jae-myung of the opposition Democratic Party currently leads in the polls.
South Korea and Japan are among the first nations to sit down with the US for tariff negotiations, and the outcome of these talks will be closely scrutinized by other countries, looking for indications of what trade concessions President Trump may demand as they prepare for their own negotiations to reduce import duties.
The US has imposed a 25% tariff on South Korean goods, which was temporarily reduced to 10% for a 90-day period. South Korea also faces a 25% tariff on its exports of cars, steel, and aluminum.
According to Bloomberg Economics, if the current tariffs remain in place, they could reduce South Korea’s GDP by as much as 0.7% by 2028. While fiscal support may help mitigate the impact, it is unlikely to fully offset the damage. Growth is projected to slow to 1.0% in 2025, down from 2.0% in 2024, representing a significant downward revision from earlier forecasts.
In response to the tariffs, the South Korean government is exploring various strategies to present to the Trump administration, aiming to reduce its trade surplus with the US. The trade surplus surged by about 25% in 2024, reaching $55.7 billion. Key topics for discussion could include shipbuilding cooperation, the Alaska pipeline project, and defense cost-sharing.
Early trade data indicates a broader decline in South Korea’s exports, which fell by 5.2% year-on-year in the first 20 days of April. Analysts attribute the downturn to companies adopting a “wait-and-see” approach, with many businesses holding off on exports until the trade talks unfold. Cho Chuel, an analyst at the Korea Institute for Industrial Economics & Trade, noted that export numbers could either worsen or improve, depending on the outcome of the negotiations.
In the midst of political instability, South Korean companies have been scrambling to secure investment deals in the US to potentially gain exemptions from the tariffs. For example, Posco Group recently signed a memorandum of understanding with Hyundai Motor Group to collaborate on a steel mill project in Louisiana.
The Bank of Korea, in light of the growing trade uncertainty, has kept its benchmark interest rate steady at 2.75%. Despite this, the central bank warned of heightened risks to growth, particularly with the potential for negative growth in the first quarter of the year due to the ongoing trade tensions.
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