South Korea struggles with uncertainty over U.S. trade negotiations

SEOUL — As the Trump administration has been churning out trade threats this week, South Korea, a crucial trading partner and military ally, has been struggling — like many — to navigate the uncertainty that looms over trade negotiations with Washington.

On Monday, Trump sent a letter dictating new tariff rates to 14 countries including South Korea, which was hit with a 25% tax. The levies were set to kick in Tuesday, but were postponed to Aug. 1. Trump left the door open for another extension, telling reporters the new deadline was “firm but not 100% firm,” depending on what trade partners could offer.

But it’s unclear whether the additional three weeks will be enough to resolve the longstanding disagreements between Washington and Seoul. One of the biggest points of contention is South Korea’s auto industry, which was the third biggest exporter of automobiles to the U.S. last year.

Although White House Press Secretary Karoline Leavitt said Monday that Trump’s phone was ringing “off the hook from world leaders all the time who are begging him to come to a deal,” the tone in Seoul has been reserved.

Last week, ahead of the initial July 8 deadline, South Korean President Lee Jae Myung, who took office last month, said “it’s difficult to say for certain that we can finish [the trade talks] by July 8.”

“Both sides are doing their best and we need to come up with an outcome that can be mutually beneficial to both parties, but we still have not yet been able to clearly establish what each party wants,” he added.

Since then, senior South Korean trade officials have been dispatched to Washington with the hopes of bringing a deal within striking distance.

“It’s time to speed up the negotiations and find a landing zone,” Trade Minister Yeo Han-koo said after meeting with U.S. Commerce Secretary Howard Lutnick on Monday.

So far, the only two countries that have struck new trade deals with the Trump administration are the U.K. and Vietnam.

But the Lee administration has maintained a note of caution. At a high-level meeting held Tuesday to discuss the current state of the negotiations, Lee’s presidential chief of staff for policy, Kim Yong-beom, reportedly emphasized the “national interest” over speedy dealmaking, instructing officials to support tariff-affected industries and “diversify” South Korea’s export markets.

Under a decades-long free trade agreement, South Korean tariffs on most U.S. goods are already zero, meaning there are fewer concessions Seoul can offer, analysts say. And on the key points of contention such as automobiles, there is little daylight to be found.

“This announcement will send a chilling message to others,” Wendy Cutler, vice president of the Washington-based Asia Society Policy Institute and former deputy U.S. trade negotiator, said in a post on X.

Trump’s letter also suggested that the U.S. will “not be open to reprieves” from sectoral tariffs, including those on automobiles, Cutler added.

South Korean trade officials have stressed that removing or significantly reducing the 25% tariffs on cars is a top priority.

White House Press Secretary Karoline Leavitt holds a trade letter sent by the White House to South Korea during a news conference on Monday.

(Al Drago / Bloomberg via Getty Images)

But South Korean cars from Hyundai and Kia factor significantly into the $66-billion trade deficit that Trump has decried as unfair. Last year, South Korea was the third biggest exporter of automobiles to the United States, to the tune of $34.7 billion. It bought $2.1 billion worth of cars from the U.S.

Until now, the country’s flagship automakers Hyundai and Kia have been able to sidestep any major tariff shocks, achieving instead record sales in the first half of the year by selling existing inventory in the U.S.

But many believe it is only a matter of time until they will have to raise vehicle sticker prices, as some competitors have done. Both companies’ operating profits are now forecasted to hit double-digit declines compared with the previous year.

The U.S. has also reportedly demanded concessions that touch on sensitive issues of food or national security in South Korea — a far harder sell to the public than the expanded manufacturing cooperation that South Korea has sought to center in the trade talks.

Among these are opening up South Korea’s rice market to U.S. imports and allowing Google to export high-precision geographic data to its servers outside of South Korea.

As an essential crop that represents a significant portion of farmers’ incomes, rice is one of the few heavily protected goods in South Korea’s trade relationships. Under its free trade agreement with the United States, Seoul imposes a 5% tariff on U.S. rice up to 132,304 tons, and 513% for anything after that.

U.S. Army soldiers attend a ceremony last month in Dongducheon, South Korea. A 2021 report from the U.S. Government Accountability Office found that it cost $19.2 billion to maintain American troops in South Korea from 2016 through 2019.

(Kim Jae-Hwan / SOPA Images via Getty Images)

The South Korean government has long denied Google’s requests to export high-precision geographic data — which is used for the company’s map services — on the grounds that it could reveal sensitive military sites that are essential for defense against North Korea. Last year, Ukraine accused Google of exposing the locations of some of its military systems to Russia.

Equally vexing are Trump’s long-running demands that Seoul should pay more to host the some 28,500 U.S. troops stationed in South Korea.

“South Korea is making a lot of money, and they’re very good. They’re very good, but, you know, they should be paying for their own military,” Trump said at a White House Cabinet meeting on Tuesday, adding that he told South Korea it should pay $10 billion a year.

Over a four-year period from 2016 through 2019, the total cost of maintaining U.S. troops in South Korea was $19.2 billion, or around $4.8 billion a year, according to a 2021 report from the U.S. Government Accountability Office. Over that period, South Korea footed about 30% of the total annual costs, in addition to providing indirect financial support such as waived taxes or foregone rents.

Under the Special Measures Agreement, the joint framework that governs this arrangement, Seoul’s payments have grown over time. Under the latest version, which covers 2026 to 2030, Seoul’s annual contribution beginning next year will be $1.19 billion, an 8.3% increase from 2025, and will increase yearly thereafter.

Trump’s demand for nearly 10 times that — along with the threats that the U.S. might pull its troops from the country — has previously drawn widespread outrage in the country, spurring calls by some for the development of South Korea’s own nuclear arsenal.

“The Special Measures Agreement (SMA) guarantees stable conditions for U.S. troops stationed in Korea and strengthens the joint South Korea – U.S. defense posture,” a spokesperson for South Korea’s Ministry of Foreign Affairs said in response to Trump’s comments.

“Our stance is that the South Korean government will adhere to the 12th SMA, which was agreed upon and implemented in a legitimate manner.”