South Korea weighs US investment pledge to trim auto tariff
Some South Korean companies have already made significant investment pledges in America
[WASHINGTON] The US and South Korea have discussed creating a fund to invest in American projects as part of a trade deal, similar to an agreement Japan struck on Tuesday (Jul 22) with US President Donald Trump, sources familiar with the matter said.
The scope of the discussions was not immediately clear, but the US has been seeking pledges totalling hundreds of billions of US dollars. The talks remain fluid, the sources said, speaking on condition of anonymity to discuss details of the negotiations.
Japan’s deal saw the country agree to backstop a US$550 billion fund in exchange for dropping a threatened 25 to 15 per cent tariff. The discount also applied to automobiles, an important export for the Asian country’s economy.
The South Korea talks are similarly focused on reaching a 15 per cent tariff rate, including for autos, one of the sources said. The deal may also include a pledge by South Korea to purchase more goods in key sectors, one of the sources said, again echoing the Japan pact, which included an agreement to purchase Boeing planes and agriculture products.
The White House declined to comment. The South Korean trade ministry also declined to comment.
Trump has threatened to impose a higher general tariff of 25 per cent starting Aug 1, in addition to the existing levies on vehicles, vehicle parts and steel that are straining ties between Seoul and Washington.
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A Korean trade delegation is in Washington this week for talks, according to the Asian nation’s finance ministry, and Trade Minister Yeo Han-koo is set to meet with US Trade Representative Jamieson Greer as part of those discussions. However, a planned “2+2” dialogue that was scheduled for Jul 25 with Yeo and Finance Minister Koo Yoon-cheol alongside Greer and Treasury Secretary Scott Bessent was postponed and will be rescheduled, the Korean side said.
Commerce Secretary Howard Lutnick has suggested a US$400 billion figure in talks with South Korea, one of the sources said. Lutnick presented that same number to Trump as part of talks with Japan but the US president eventually negotiated the fund up to US$550 billion.
Japan’s economy is more than double the scale of South Korea, making equal US dollar-value pledges a tall order for Seoul.
Some South Korean companies have already made significant investment pledges in the US. The chairman of Hyundai Motor visited the White House in March to announce a US$21 billion investment plan that includes an expansion of vehicle production in Georgia and a new steel plant in Louisiana.
The deal with Japan threatens to create a competitive advantage for that country’s automakers if Seoul is unable to reach a similar agreement.
“This really puts a lot of pressure on South Korea. If they can get 15 per cent, I’m sure they’d be thrilled, but they are in a different position than Japan,” said William Chou, deputy director of the Japan Chair at the Hudson Institute, a conservative think tank.
That notion was echoed by the White House on Wednesday.
“We are in a situation where, for example, German cars are going to be at a disadvantage now, to Japanese cars, because it’s a 25 per cent tariff on German cars. Same thing with Hyundais from South Korea,” White House trade adviser Peter Navarro said on Wednesday on Bloomberg Television. Navarro said the Japanese deal was best interpreted as the president “doing a synergistic whole deal with the rest of the world”.
“This is just one part of that chess game,” he said.
Trump, speaking at an artificial intelligence event earlier Wednesday, suggested that he would not go below 15 per cent as he sets so-called reciprocal tariff rates, while also indicating he would reward nations that removed trade barriers on US exports.
“The tariff is very important, but the opening of a country, I think, can be more important if our businesses do the job that they are supposed to be doing,” Trump said. “Such openings are worthy of many points in tariffs.” BLOOMBERG
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