President Donald Trump (Image courtesy of Yonhap)
WASHINGTON, March 6 (Korea Bizwire) — Experts underscored the need Thursday to crank up diplomacy to pitch South Korea’s contribution to the U.S. economy to counter President Donald Trump’s apparently negative perception of the Asian ally as a trading partner, though the absence of leader-to-leader engagement remains an onerous hurdle to that effort.
They advised South Korea to explore and prepare various options, such as investment in U.S. shipbuilding capacity and participation in a U.S. natural gas pipeline project, so as to respond more strategically to any demands from the Trump administration.
Experts also anticipated adjustments — if not outright abolition — to the CHIPS Act, enacted during the Biden administration to boost domestic semiconductor production, while noting South Korean firms need to work carefully to minimize potential disruptions to their long-term operations in the United States.
The experts made these suggestions after Trump said in Tuesday’s address to Congress that South Korea’s average tariff is four times higher than that of the U.S., while highlighting the U.S. has helped the ally “militarily” and in “so many other ways” — remarks that sent many in Seoul scrambling to grasp their policy implications.
Trump said in Tuesday’s address to Congress that South Korea’s average tariff is four times higher than that of the U.S. (Image courtesy of Yonhap)
“Trump mentioned South Korea, along with India and China, in regard to tariffs so he wasn’t necessarily singling out South Korea in his complaint about foreign tariffs. But South Korea, unlike India and China, is a close ally,” Andrew Yeo, the SK-Korea Foundation chair at the Brookings Institution’s Center for East Asia Policy Studies, said.
“Trump does appear to hold some negative beliefs or bias against South Korea. Koreans need to counter Trump’s misleading statements by pointing out their own contribution to the U.S. economy,” he added.
In response to Trump’s tariff remark, Seoul countered that South Korea’s average tariff rate on U.S. products stands at less than 1 percent under a bilateral free trade agreement, as it seeks to beef up policy communication with the Trump administration though both working- and high-level engagement.
A Seoul official has said that Trump appears to be referring to South Korea’s average tariff on its most-favored nations (MFNs), which stands at around 13.4 percent — a rate not applicable to countries with free trade deals with Asia’s fourth largest economy. The U.S. imposes a 3.3 percent tariff on its MFNs.
“It should be relatively easy for the ROK to sort through with the Trump administration the actual and effective average tariff rate imposed on U.S. goods by the ROK. That information is readily available, and it’s unfortunate President Trump’s speech to Congress did not reflect that,” Rob Rapson, a retired U.S. diplomat who formerly served as charge d’affaires at the U.S. Embassy in Seoul, said. ROK is short for South Korea’s official name, the Republic of Korea.
“However, there is a deeper underlying concern with respect to the president’s attitude towards Korea, which goes back to his first term and even earlier, namely that he generally seems to view Korea as a ‘free-rider,’ and especially with respect to the U.S.-ROK security alliance.”
Touching on Trump’s tariff remark, Patrick Cronin, the chair for Asia-Pacific Security at the Hudson Institute, pointed to Trump’s advocacy for “fair and reciprocal” trade and South Korea’s growing trade surplus with the world’s largest economy.
“Some may find references to high tariffs from Korea confusing, as the Korea-U.S. Free Trade Agreement — which President Trump successfully renegotiated in 2018 — was designed to eliminate most tariffs,” he said. “This suggests a need for U.S. and South Korean trade negotiators to revisit unresolved inequities in the trade relationship.”
Experts underlined the need to emphasize the contributions South Korean businesses have made and will make to the U.S. economy, including job growth, to project a more positive image of South Korea as a trading partner.
From chipmaking plants to auto facilities and a battery manufacturing facility, various South Korean businesses have increased or promised to bolster their investment in the U.S. as America has been pushing to strengthen domestic production and shift global supply chains away from China.
But shaping a better image of South Korea needs a direct leader-to-leader engagement, observers have said. South Korea has been in a period of political uncertainty due to the impeachment of President Yoon Suk Yeol over his short-lived martial law imposition in December.
“I don’t think Koreans should be surprised by his comments (on Tuesday night),” Victor Cha, president of the Geopolitics and Foreign Policy Department and Korea Chair at the Center for Strategic and International Studies (CSIS), said.
“If you track his comments over time, it is clear that he thinks Korea’s US$61 billion trade surplus — the 4th largest among Indo-Pacific and NATO allies — means Korea is not playing fair on trade,” he added, referring to the North Atlantic Treaty Organization.
Noting Trump is “strategically predictable and tactically unpredictable,” Cha also said, “Korea is at a loss to do anything until it has a new leader in place.”
Trump’s mention of South Korea’s reliance on U.S. military support in the address could foreshadow what has long been anticipated: a demand for a rise in Seoul’s “burden” sharing.
“Trump 2.0 will undoubtedly want to reopen or renegotiate the Special Measures Agreement that was speedily concluded last November by Biden and Yoon,” Rapson said, referring to a deal on Seoul’s share of the cost for stationing the 28,500-strong U.S. Forces Korea.
“Based on his campaign rhetoric, Trump will be looking for a much higher ‘burden sharing’ contribution from the ROK, anywhere from five to ten times higher. The threat and real possibility of U.S. troop reductions on the peninsula also looms, much more so than in 1.0.”
Rapson also said that Trump’s congressional address suggests he may be looking at the entirety of U.S. security and economic contributions to South Korea over many decades as a basis on which he seeks some form of “compensation” or “return” on U.S. “investment” from Korea.
U.S. President Donald Trump attends the Super Bowl LIX in New Orleans, Louisiana, U.S (Image courtesy of Yonhap)
Bruce Bennett, a senior defense analyst at RAND Corp., said that Trump might ask South Korea to jack up its defense spending, as he cited a media report that Trump is asking Taiwan to hike its defense spending to 10 percent of its gross domestic product (GDP).
“We don’t know what President Trump will ask of South Korea, but it would not be surprising if he asked for South Korea to spend something between 3 and 5 percent of GDP, and perhaps more,” he said.
Trump’s call for removing the CHIPS Act during the address also drew keen attention in South Korea as well, as under the act, the previous Biden administration agreed to provide grants to two South Korean tech firms, Samsung Electronics Co. and SK hynix, to support their chipmaking investments in the U.S.
“I think it’s a given that the Trump administration will walk back — if not outright cancel — the CHIPS Act and its generous subsidies as a Biden-era relic,” Rapson said.
“Their basic thinking seems to be that the U.S. should not have to pay for foreign investment in the U.S. semiconductor sector, but rather foreign chip firms should do so on their own volition or be ‘incentivized’ to by U.S. tariffs and other considerations.”
Cronin expected that the CHIPS Act’s government-driven grant model will be replaced by alternative incentives, such as tax breaks.
“Parts of the CHIPS Act may be adjusted in ways that reduce incentives for foreign companies, but given the U.S. need for semiconductors, I doubt it will be entirely abolished,” Yeo said.
Experts underlined the need for Seoul to have various options in place to respond to any policy request or changes.
“A menu of options or combination of options, across a broad spectrum of issues and sectors, needs to be in hand to deploy — or not — in response to specific and varied U.S. requests or demands,” Rapson said. “Investment in U.S. shipbuildiniuug capacity and participation in a U.S. LNG pipeline project are possible options with potential. There are more, undoubtedly.”
(Yonhap)
