[THE VIEW] Prolonged Korea-US Negotiations: Time for Government Action

Tariffs, Labor, and Employment: The Triple Crisis of Chaos
Learn from America's Speed and Focus, Not Europe's Regulatory Failures

Economic instability and uncertainty are more severe than ever. In July 2025, South Korea and the United States announced an agreement to respond to certain U.S. tariff measures, but the details were not made public. Foreign media interpret this lack of specifics as a sign that negotiations will be prolonged. President Donald Trump has reaffirmed that, despite the Korean negotiating team's persistent demands to lower auto tariffs, he will not reduce tariffs on Korean and American imports to 15%. In reality, the 25% tariff on automobiles remains in place. As a result, the outlook for an early conclusion to the negotiations has dimmed, and high tariffs and tensions in the foreign exchange market are forcing Korean companies to accept emergency management as the new normal.

At the same time, domestic risks that Korean companies must endure are also significant. Discussions on amending the Commercial Act are fueling concerns over management rights, while the so-called "Yellow Envelope Act" (amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act) is increasing uncertainty in labor relations. Nevertheless, major corporations, including Samsung and SK, have recently announced large-scale recruitment of new employees. If this signals investment in the future, it is a welcome development. However, at a time when merely responding to high tariffs and uncertainty is already challenging, if large-scale hiring simply expands headcount rather than bringing about a qualitative shift in total employment, it is risky. Global companies are already boldly redesigning roles that can be replaced by artificial intelligence (AI) and automation to reduce costs, while focusing their resources on new businesses and technologies by offering "the compensation of ten or even one hundred people" to top talent. If South Korea moves in the opposite direction by simply expanding total employment, the gap in productivity and talent will widen dramatically.

The United States perceives China's challenge for AI supremacy as a crisis and is implementing a full-stack industrial policy that simultaneously mobilizes technology, capital, and talent. The federal and state governments guarantee initial sales through public procurement and defense demand, fast-track essential resources such as power for data centers by streamlining regulations, and attach substantial tax credits to strategic items designated by the state. They favor supply chains from allied countries and provide visible incentives for reducing dependence on China, thereby creating a virtuous cycle and expanding a massive domestic AI digital market.

In contrast, Europe, with its fragmented market, rigid labor regulations, and detailed regulatory design, has imposed prohibitions and obligations that have shifted high costs onto startups. Well-intentioned regulations have constrained the speed and scale of innovation, resulting in poor economic performance. We should not repeat the already proven limitations of the European model, but instead support companies with a strategy that offsets external risks with domestic support.

On the 15th, export cars were parked at Pyeongtaek Port in Gyeonggi Province. From the 16th, a 15% tariff will be applied to Japanese cars in the United States, but the 25% tariff on Korean cars will be maintained. Photo by Yonhap News Agency

Even amid chaos, the tasks for the Korean government are clear. First, it must buy time for companies to restructure their business models in anticipation of a prolonged tariff scenario, and pre-design the scale and methods of support. Saying "just stop exporting" is out of touch with reality. South Korea's economy has grown through exports, and creating alternative demand takes time. Second, there must be a qualitative shift in employment. Although late, it is still necessary to foster high-quality talent from now on and to link incentives to AI-centered productivity improvements and training for new business transitions, rather than resorting to large-scale hiring for show.

It is time to move away from shallow, quantity-driven approaches. The focus should not be on how many people are hired, but on what kinds of jobs are being created. Third, the predictability of labor-management relations must be improved. While the right to strike should be guaranteed, alignment between labor and management must be clarified. The government needs to rebalance the scales, which have already tipped in favor of management. In a situation where external pressures are intensifying the "Korea Discount," it is crucial not to amplify domestic risks and create a "double discount," as this will endanger both businesses and, ultimately, workers as well.

The key is speed and consistency. As external shocks such as tariffs become the new normal, the government must reduce internal uncertainty, channel resources into productivity, and respond to external negotiations as swiftly as possible within its means. We continue to await decisive action from the government.

Kyeong Nakyeong, Professor of Computer Science, National University of Singapore