"High Tariffs Are the New Normal"... Government Shifts Focus from 'Withdrawal' to Practical Gains [Issue Focus]

As the Korea-U.S. trade negotiations enter their final stage, the South Korean government's negotiation strategy is shifting. With the United States solidifying its stance to maintain high tariffs as a constant on strategic items such as steel, the government has retreated from its previous demand for a "withdrawal" and is now adopting a negotiation framework based on "coexistence" and an "expanded balance" strategy. This is a pragmatic approach that accepts the high-tariff policy itself as the new normal in international trade and seeks to maximize practical benefits within that framework.

A senior official from the Ministry of Trade, Industry and Energy recently told reporters, "The international trade environment, premised on high tariffs, is becoming the new normal," adding, "Rather than insisting on withdrawal, Korea is focusing on realistic strategies that can yield practical benefits within this environment." This means that Korea does not intend to remain on the defensive, but rather aims to proactively create a new landscape for cooperation.

In the current negotiations, the government is prioritizing the removal of non-tariff barriers and the expansion of manufacturing cooperation over the issue of tariffs themselves. Recognizing the United States' consistent emphasis on "manufacturing revival" since the Inflation Reduction Act (IRA), the government is focusing on how Korea can contribute as a partner in this area.

In fact, the Ministry has put forward the keyword "expanded balance" as the guiding principle of its negotiation strategy. Rather than defending a short-term trade surplus, the government believes that if Korea makes substantial contributions to structural factors such as employment, investment, and fiscal matters?which the U.S. values?the two countries can find broader areas of mutual benefit, even in the presence of existing tariff barriers.

The expansion of Korean companies' investments in the United States is a representative card in this strategy. Local production in the U.S. leads to job creation and increased tax revenue, and when products manufactured there are exported to third countries, it can also help reduce the U.S. trade deficit. In this way, the government's pragmatic strategy seeks to avoid a "zero-sum game" over tariffs and instead move toward a "mutual contribution structure."

This approach was also reflected in the 3rd Korea-U.S. Technology Working-Level Talks held in Washington, D.C. from June 24 to 26 (local time). While the Korean delegation led by Trade Minister Yeo Han-koo had focused on understanding U.S. demands in the first and second rounds, this time they began to concretely outline Korea's possible responses.

The government has also made it clear that it will not be bound by the negotiation deadline of July 8. There are various possible outcomes, including country-specific exemptions, partial agreements, and ongoing negotiations, and substantial talks may continue beyond the deadline. In fact, trade officials state, "The key to this negotiation is not speed, but direction," and emphasize that "it is more important to keep the negotiations going without a breakdown."

President Donald Trump recently declared to other countries, "If negotiations are not concluded by July 8, there will be consequences," but this is also seen as a typical Trump-style negotiation pressure tactic. The prevailing interpretation is that it is a message intended to draw more concessions from the counterpart through his characteristic "drawing a line" approach. In reality, past trade patterns show that President Trump has often granted exceptions or extensions to multiple countries just before the final deadline.

The prevailing view within the Korean government is that the current trade environment has moved beyond the simple dichotomy of "tariff elimination or maintenance." The United States is using tariffs both as a tool for trade pressure and as an instrument of industrial policy, and Korea's response is also being formulated within a long-term framework. July 8 is merely one deadline, and there is a strong possibility that the real negotiations will continue beyond that date. The government's decision to set aside the term "withdrawal" is seen as a pragmatic move aimed at leading to better negotiating conditions.