South Korea's Indo-Pacific Role Under Discussion in US Trade Talks
Last week, Chosun Ilbo reported that the United States had formally asked South Korea to broaden the scope of the United States-Republic of Korea (ROK) Mutual Defense Treaty's Article III to cover the wider Indo-Pacific region. Today, Hankook Ilbo reported that the push to expand the role of U.S. Forces Korea (USFK) across the Indo-Pacific under the so-called 'alliance modernization' framework is now a part of the bilateral tariff talks between the two countries.
The request to reframe the South Korea-U.S. alliance as a 'comprehensive strategic partnership for the future' was made by U.S. Deputy Secretary of State Christopher Landau in Tokyo on July 18. This would presumably include a role for South Korea in a China-U.S. conflict, such as a crisis in the Taiwan Strait. Landau also raised issues such as increasing South Korean defense spending (reportedly from 2.3 percent of GDP to 5 percent of GDP) and greater cost-sharing for deployment of U.S. strategic assets in the region. These discussions echo meetings that U.S. Deputy Assistant Secretary of State Kevin Kim held in Seoul on July 10-11.
Such developments align with the Pentagon's Interim National Defense Strategic Guidance from March, and what is expected from the full National Defense Strategy (NDS) and Global Posture Review (GPR) later this year: an assertion that deterring a Chinese invasion of Taiwan is the United States' top priority. The United States has also pressed Japan and Australia for clarity on what they would do in a Taiwan Strait contingency and clarified with the Philippines that their mutual defense pact 'extends to armed attacks on our armed forces, aircraft or public vessels, including our Coast Guard, anywhere in the Pacific, including the South China Sea.'
While all countries prefer to maintain strategic ambiguity over Taiwan to not upset China (South Korean President Lee Jae-myung has previously expressed reluctance to involve South Korea in a Taiwan-related security issue), South Korea is different from Japan and Australia. South Korea faces a direct threat from a different source: North Korea.
For Seoul, USFK has always been about addressing the threat from North Korea. Thus, South Korea has been reluctant to embrace the 'one theater' concept that Japan champions, which integrates the Korean Peninsula with the East and South China Seas. The United States, Australia, and the Philippines reportedly support this concept, while South Korea understands the risk that such a structure could take away U.S. resources from deterring and if needed, defeating North Korea.
However, with the deadline for trade talks looming on August 1, South Korea has sought trade concessions, including on tariffs and non-trade barriers, in return for accepting the U.S. request to recalibrate the USFK's strategic posture. Alliance modernization is a broader issue that also encompasses increased defense spending and expanded cooperation in the defense industry; the topic cannot be fully settled in the current round of trade talks. Still, a senior official from South Korea stated, 'We're asking the U.S. to show flexibility in trade in proportion to our security contributions.'
The purpose of the South Korea-U.S. alliance in an era of increasing China-U.S. competition has already been under debate, and the ongoing deliberations will affect topics such as wartime operational control and extended nuclear deterrence. Throughout this, it is important not to antagonize China. It is also vital for U.S. officials to '[bring] South Korea into the process early and often' to not politicize the changes.
As the deadline for the trade talks fast approaches, it will be interesting to see whether tying economics and security will make it easier or more difficult for Lee to sell the changes in the nature of the alliance to the South Korean public. Lee's success will, of course, hinge on the U.S. reception of the South Korean overture.
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"Instead of the U.S. at the head of a system created to reduce trade barriers and conduct trade relationships according to predictable, mutually agreed rules, countries wishing to trade with the U.S. will now face dramatically higher tariffs that could be further increased at the whim of a president who has shown a disdain for trade rules and trade agreements -- even those which he himself has signed," he said. Olson said that while many countries continue to adhere to the principles of free trade, the U.S. is effectively opting out and it "remains to be seen how or if that system can continue to function." He warned that the latest announcement is unlikely to be the end of the story. "Trump regards this as an ongoing reality show. More 'deals' or further tariff increases are almost certain to follow." Southeast Asian countries hoping to pursue export-led development "will be especially hard hit," he said. 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On the semiconductor front, Wong Siew Hai, president of Malaysia Semiconductor Industry Association commended that the government has put in a tremendous amount of effort to get it down as low as possible, in a "more level playing ground" relative to all the other countries in ASEAN. "From our perspective, the way I see it is that currently business will be as normal. Meanwhile, everybody has to find a way to compete as aggressively as possible, by working on productivity, getting on into technology and so on, until everything settles. Nothing is said about the sectoral tariff that is currently exempted," Wong said. 11:30 a.m. Australia's Minister for Trade Don Farrell said the country's engagement with the U.S. had paid off after the U.S. ally's tariff rate remained at 10%, and added that the government would move to take advantage of having a more competitive rate than some peers. "This is a vindication for the Albanese government, and particularly the prime minister, in the cool and calm way that we have conducted diplomacy with the United States," Farrell told reporters in Adelaide on Friday. He said Australian products like beef -- its top export to the U.S. -- as well as lamb, wine and wheat would be more competitive in the U.S. "As a government, we will assist all of our exporters in ensuring that we take advantage of this situation and increase the volume of exports, not just to the United States, but to all of those other countries that we have diversified with," he said, adding the government would continue pushing its U.S. counterparts to eliminate tariffs and had invited U.S. Secretary of Commerce Howard Lutnick to Australia for discussions. 11:05 a.m. Here are the U.S. "reciprocal" rates on key Asian countries: For further charts on the latest tariffs, check out our tracker. 11:05 a.m. The latest U.S. tariff adjustments reflect a more nuanced approach to "friendshoring," targeting countries closely tied to Chinese value chains while easing pressure on those like Malaysia that retain strategic flexibility, said Khoo Ying Hooi of the University of Malaya. "It signals that the U.S. is not shutting out ASEAN but curating trade ties based on geopolitical behavior," she told Nikkei Asia, adding it boosts investor confidence in Southeast Asia as a viable alternative for supply chain diversification. Former diplomat Ilango Karuppannan agreed, calling it a dual message of discipline and openness. While higher tariffs may raise cost concerns, he said the move also reaffirms Southeast Asia's strategic role in U.S. supply chain realignment. Countries like Malaysia, Thailand, and Indonesia may benefit as "second-best" but geopolitically favorable options. Mohd Faiz Abdullah of the Institute of Strategic and International Studies noted that Malaysia's role in the Thai-Cambodia truce and Prime Minister Anwar Ibrahim's diplomatic engagement influenced the outcome. "This deal was reached without compromising our sovereignty -- our Bumiputera policy, procurement rules, and domestic space remain intact," he said, referring to affirmative action policies to help native Malays. 11 a.m. Taiwan's President Lai Ching-te posted on Facebook that his negotiators in Washington were informed by the U.S. that the 20% rate is "provisional." "The main reason is that, due to procedural arrangements, the U.S. and Taiwan have not yet completed the final wrap-up meeting," Lai wrote. "If an agreement is reached later, the rate is expected to be reduced." He added that the two sides will continue negotiations on supply chain cooperation and other matters. 10:55 a.m. Thai Deputy Prime Minister and Finance Minister Pichai Chunhavajira, who led the government's negotiation team, said in a social media post: "It helps maintain Thailand's competitiveness on the global stage, boosts investor confidence, and opens the door to economic growth, increased income, and new opportunities for the country. "The outcome of this negotiation signals that Thailand must accelerate its adaptation and move forward in building a stable and resilient economy, ready to face global challenges ahead." 10:50 a.m. Wendy Cutler, senior vice president of the Asia Society Policy Institute and a former deputy U.S. Trade Representative, flagged some of the key things in, and missing from, Trump's executive order (EO): "What seems to be absent from the EO is whether existing or new rules of origin will be issued and/or negotiated. This is of key importance in light of the 40 percent transshipment tariff now applicable beyond Vietnam. "U.S. companies will also face challenges as they navigate this new tariff landscape. Of particular concern is the continued uncertainties they will face with new sectoral tariffs coming and possibilities of additional tariffs if the Administration believes countries are not operating in good faith in their implementation efforts. "No doubt about it -- the EO and related agreements concluded over the past few months tears up the trade rule book that has governed international trade since WW2. Whether our partners can preserve it without the United states is an open question." 10:45 a.m. U.S. President Donald Trump announced the new tariff rates in an executive order early evening Washington time, early morning in East Asia.
