'Script, Direction, and Leading Role by Trump'...A Review of the Korea-US Tariff Negotiations [New York Diary]

'Script, direction, and starring role-all Trump.'

This is the review of a reporter who observed the process of the Korea-US tariff negotiations. Not only in Korea, but also in negotiations with the United States and Japan, as well as the European Union (EU), a similar pattern unfolded. Under the pretext of resolving the trade deficit and backed by the world’s largest consumer market, Trump unleashed a barrage of tariffs as a pressure tactic. Major trading partners, including Korea, found it difficult to secure equal bargaining power in the face of this strategy. In the so-called 'tariff drama' orchestrated by Trump, each country played only a supporting role, moving according to the script written by the United States.

Trump's message is simple and clear: he intends to improve the US trade balance and revive manufacturing through tariffs. In other words, if you want to do business in the United States, you have to pay a higher 'admission fee'-that is, tariffs.

Trump even provided a model answer. Citing Japan’s 550 billion dollar investment in the United States, he bluntly stated, “Other countries can also buy it down,” meaning they could lower tariffs by paying more. Subsequently, Korea agreed to invest 350 billion dollars in the United States in exchange for a 15% tariff rate. The United States first unilaterally announced high tariffs-25% for Korea and Japan, and 30% for the EU. Then, by securing increased investment in the United States and easing non-tariff barriers, it lowered the tariff rate to 15% using the same strategy. This was a textbook example of Trump’s deal-making tactics, cleverly exploiting the sense of rivalry and anxiety among the counterparties. The commemorative photo at the White House with the Korean and Japanese negotiation teams was the finishing touch, showing that Trump remained the lead actor and director until the final scene of the tariff drama.

Donald Trump, President of the United States, is taking a commemorative photo with representatives from both countries after reaching a trade agreement with the South Korean government negotiation team at the White House in Washington DC on the 30th (local time). 2025.7.31 White House X account Yonhap News Photo by Yonhap Reporter

On this 'tilted playing field' designed by Trump, the Korean government concluded negotiations just before the mutual tariffs were set to take effect in August. Considering that the new administration was inaugurated in early June and was pressed for time, it is commendable that Korea secured the same 15% tariff rate as Japan and the EU, which had reached agreements earlier, thereby avoiding the worst-case scenario of being treated less favorably than its competitors. However, the government’s self-congratulatory promotion of the trade agreement’s achievements immediately after the deal appears far from prudent. The government even distributed materials highlighting the process of specially producing and gifting a hat symbolizing the 'MASGA (Make American Shipbuilding Great Again)' project to the United States. The head of the Ministry of Trade, Industry and Energy, Kim Jeonggwan, further fueled the celebratory mood by saying, “Sincerity moves heaven,” and “Trump even gave a hug.” Yet, there are still many hurdles to overcome in subsequent negotiations.

A closer look at the agreement makes it difficult to feel entirely relieved. The mutual tariff-free system maintained through the Korea-US Free Trade Agreement (FTA) has been virtually nullified. In the case of automobile tariffs, Japan’s rate rose from 2.5% to 15%, but Korea’s jumped from 0% to 15%, eliminating its 2.5 percentage point advantage. Steel remains subject to a 50% tariff. Trump has also announced plans to introduce separate tariffs on semiconductors and pharmaceuticals next week. Even these conditions were accepted in exchange for Korea’s 350 billion dollar investment in the United States. The government claims that most of the promised investment is in the form of guarantees, so the actual burden is not significant. However, with no official agreement document, expecting to gloss over these issues is a dangerous approach in the Trump era. Since Trump insists that investments from other countries are “gifts, not loans,” there is a high likelihood of disagreements and disputes arising in future detailed negotiations.

Korean companies find themselves in the midst of a trade war, with Trump’s tariff bombs exploding everywhere. The government’s self-congratulatory remarks do little to mask the persistent risks posed by Trump, and the reality facing businesses remains harsh. Furthermore, the government and ruling party are simultaneously pushing policies that increase the burden on companies, such as amendments to the Commercial Act, the Yellow Envelope Act, and corporate tax hikes. Their attitude-being preoccupied with clearing the first hurdle of tariff negotiations while ignoring the realities faced by businesses-clearly demonstrates a complacent perception of the US-led trade war.