WASHINGTON D.C. – South Korean President Lee Jae Myung’s first bilateral meeting with US counterpart Donald Trump ended in a cordial atmosphere on Monday, with both leaders agreeing to strengthen their partnership as economic and security allies.
However, the summit, held about one month after the two countries reached a tariff deal, fell short in one key aspect: the absence of a joint statement, a customary outcome of presidential meetings unless significant differences remain unresolved.
The reason is that Washington balked at Seoul’s repeated request to formalize their tariff deal in writing, people familiar with the situation told The Korea Economic Daily.
According to the tariff deal, the US has agreed to set reciprocal tariffs on South Korean exports at 15% and reduce duties on South Korea-made automobiles to 15% from 25%.
However, Washington has yet to lower levies to 15% on Korean automobiles and auto parts.
The US was also unwilling to put its pledge in writing to grant Asia’s No. 4 economy most-favored-nation (MFN) status, said one of the sources.
The MFN status will ensure South Korean semiconductor and pharmaceutical products are subject to the same tariff rates as those from Europe and Japan.
The two sides have agreed to apply either a 15% reciprocal tariff or MFN rates on South Korean exports, but remain split over whether the rates would extend to product-specific duties.
The South Korea-US summit sidestepped those contentious matters.
A South Korean trade official acknowledged that certain details remain unresolved in broader security and diplomatic issues with the US.
However, he cautioned that Washington’s hesitance to formalize their trade agreement in writing should not be seen as a move to retract its pledges on auto tariff reductions, or MFN treatment for semiconductors and other products.
MORE CONSESSIONS FROM SOUTH KOREA?
Korean analysts view Washington’s reluctance to clarify those key issues as a strategic move to extract further investments from Seoul, as well as increased contributions to share defense costs.
The absence of a written pledge also gives the US leverage to pressure South Korea into further opening its agricultural market, a potentially sensitive issue in their bilateral trade talks.
The opening South Korea’s rice and beef market was excluded from their tariff negotiations.
However, South Korea has made significant concessions on lowering non-tariff barriers on digital trade and car imports to the US, according to the sources.
The sources also point to legal instability of the new US tariffs. The reciprocal tariff, imposed by Trump under the International Emergency Economic Powers Act, is under review at a US appeals court and could be ruled illegal.
By contrast, product-specific tariffs imposed on steel since the first Trump administration carry legal certainty under Section 232 of the Trade Expansion Act.
$350 BILLION FUND DEDICATED TO US
Possible disputes over how to structure a $350 billion US-dedicated fund pledged by Seoul is cited as another reason for Washington’s reluctance in formalizing its trade deal with Seoul.
Kim Yong-bum, South Korea’s presidential chief of staff for policy, told reporters on Monday that the two sides have agreed to use a financing package under a non-binding memorandum of understanding for the fund.
Seoul is structuring its commitment through loans and payment guarantees. But Washington is pressing for Seoul to take an equity stake in the fund.
Washington is also wary about Seoul’s plan to earmark $150 billion of the $350 billion fund for shipbuilding, which could limit its ability to direct the funds in ways it sees fit.
On Tuesday, Commerce Secretary Howard Lutnick said on CNBC that the US plans to set up a national economic security fund with capital from South Korea, Japan and other countries.
Now Seoul is bracing for the possibility of extended trade talks with Washington.
“The new normal in trade and security talks is constant discussion,” Presidential Chief of Staff Kang Hoon-sik said at a press briefing following the South Korea-US summit.
By Sang-Eun Lucia Lee, Jae-Young Han and Dae-Hun Kim
shlee@hankyung.com
Yeonhee Kim edited this article.
