Final week of US-Korea trade talks sees shipbuilding as key

Korea Herald

12 hours ago

Seoul is racing to finalize a tariff deal with Washington before the Aug. 1 deadline, as Finance Minister Koo Yun-cheol prepares to meet US Treasury Secretary Scott Bessent on Thursday in a bid to avert a 25 percent tariff on Korean exports, including autos.
According to the industry and government sources on Sunday, the meeting between Koo and Bessent has been rescheduled for Thursday, likely at the US Treasury Department. Their meeting was initially planned for Friday with Korea's Trade Minister Yeo Han-koo and US Trade Representative Jamieson Greer, but was postponed by the US side.
Korea's industry and trade chiefs, who are currently visiting the US, will remain there to continue last-minute high-level negotiations. To their US counterparts, they have outlined plans for cooperation in key strategic manufacturing sectors such as semiconductors, shipbuilding and batteries, while strongly urging tariff reductions on items such as automobiles.
The Korean government has presented a revised proposal that includes sensitive agricultural and livestock products, going further than its initial offer to address US concerns. Washington, however, is reportedly pressuring Seoul for greater concessions.
The tight schedule remains a major hurdle. The US is to hold trade talks with the European Union on Sunday, and is set to conduct high-level trade meetings with China on Monday and Tuesday, leaving only Wednesday and Thursday available for negotiations with Korea.
Last week, Japan secured a reduction in tariffs on its auto exports to the US, with rates falling from 27.5 percent to 15 percent, after offering a $550 billion investment package. The deal has increased pressure on Korea, whose auto industry still faces the full 25 percent tariff.
As Japan, Korea's key rival in the sector, gains an upper hand, Seoul is reportedly preparing a $100 billion package, along with additional commitments, to remain competitive
Given that the US' ultimate goal is to revive its manufacturing sector, Seoul is focusing on leveraging industrial cooperation, particularly in the shipbuilding sector, where Korea holds a competitive edge.
'We confirmed the US has a strong interest in shipbuilding and agreed to work on mutually acceptable solutions, including bilateral cooperation in the sector," Korea's presidential office said Saturday.
Trump has repeatedly stressed the importance of strengthening the US' shipbuilding industry and issued an executive order in April aimed at revitalizing the sector and curbing China's maritime dominance.
Experts warn that the US tariffs, if maintained at the threatening 25 percent level, are expected to hit Korea's manufacturing sector the hardest. It accounts for 27.6 percent of Korea's economy — well above the OECD average — and exports make up 44 percent of the nation's gross domestic product.
The US auto tariffs have already impacted Korea's leading automakers. Hyundai Motor and Kia both reported weaker earnings in the April-June period: Kia's operating profit plunged 24.1 percent, while Hyundai's figure dropped 15.8 percent.
The Korea Institute for International Economic Policy has warned that Korea's real GDP could shrink by up to 0.4 percent if the US tariffs are implemented as initially planned.
'If the US' 'reciprocal' tariffs of 25 percent take place, Korea's real GDP can decrease by 0.3-0.4 percent even after the economy stabilizes," the institute said in a public hearing in June.
With Japan recently securing a tariff reduction to 15 percent, Korea's growth prospects are expected to worsen under a higher rate, given that the two countries have similar export portfolios to the US.
Korea's already stagnant growth outlook — currently projected at below 1 percent — would also likely face a further downgrade if the 25 percent reciprocal tariff is imposed.
According to the Bank of Korea on July 24, the country's growth rate is likely to remain around the May forecast of 0.8 percent, in the case that the tariff rate is lowered to 15 percent, similar to Japan's. The rate could fall to zero if the tariff is set at 25 percent.
US President Donald Trump said that his administration will have most of its trade deals with countries finished by Aug. 1.
The president also said his administration might send letters to close to 200 countries informing them of their tariff rate, which he said means, "They have a deal. It's done."