Pushed by Trump's tariffs, East Asian rivals revisit free trade pact

Korea Herald

14-04-2025

Amid renewed economic talks, longstanding tensions, US pressure raise questions
The unpredictable tariff policies of US President Donald Trump are bringing an unlikely trio in East Asia together -- South Korea, Japan and China -- as long-stalled free trade talks between the regional rivals have gained steam once again.
Last month, just days before Trump so-called 'Liberation Day" on Wednesday, the start of his self-proclaimed "reciprocal" tariffs on most countries, amounting to the most sweeping tariff hikes since 1930, the three neighboring countries –- all hit with especially heavy tariffs -- held their first economic talks in six years. The top trade officials of Seoul, Tokyo and Beijing all agreed to bolster cooperation in economy and trade and to speed up negotiations for a trilateral FTA.
Finance Minister Choi Sang-mok said that same day -- the same day Trump's 25 percent tariffs on South Korean goods took effect -- that the government would push for negotiations on the trilateral FTA as soon as possible.
However, just hours after the new tariffs kicked in, Trump announced a 90-day pause for Korea, Japan and most other countries. Meanwhile, he upped the stakes on China, which now faces a staggering tariff rate of 145 percent.
Negotiations for an FTA between the three countries have been on and off for more than a decade since they began in 2012. Around 16 rounds of official talks have taken place, but efforts were largely stalled due to geopolitical tensions and fears over domestic industry disruptions.
The three economies all rely heavily on similar export-driven manufacturing sectors, producing automobiles, semiconductors and steel, with overlapping interests, prompting concerns that deeper market tie-up could harm domestic industries.
Geopolitical and trade tensions have also been a major hurdle. These include: Japan's 2019 export controls on South Korea, China's apparent economic retaliation in response to Korea's deployment of the US THAAD missile defense system, and longstanding historical and territorial disputes that have repeatedly derailed cooperation.
'Existing bilateral deals such as the Korea-US FTA, and Korea and Japan's alliances with Washington, as well as issues involving North Korea have also acted as constraints,' said Park Inh-hwi, a professor of international studies at Ewha Womans University.
Despite these constraints, the recent revival of talks seems to be driven by intensifying uncertainty among the three countries -- the economies of which are deeply intertwined with the US -- amid Trump's tariffs, observers say.
"In the aftermath of Trump's tariff war, discussions around a Korea-Japan-China FTA have reemerged, as such a pact could help mitigate some of the risks posed by US tariffs," Park added.
Many experts here acknowledge the long-term benefits of an FTA, but remain skeptical about its near-term feasibility.
A successful FTA among the three countries could result in an economic bloc with a greater GDP than the European Union, which could potentially serve as a safeguard against Trump's erratic policies. The three countries make up 20 percent of the global population, while their combined nominal GDP reached $23.7 trillion in 2023, representing around 23 percent of global GDP and surpassing the EU's $18.6 trillion, according to World Bank data.
'It won't be easy,' said Park. 'There are benefits to the FTA, but the timing is complicated. It could appear as in opposition to Trump's trade policies or seem like forming a China-centered alliance, which could provoke backlash."
Park Inn-won, professor emeritus at the College of International Studies at Korea University, echoed that sentiment. "Realistically, it's not simple, especially at a time when the US and China are playing a 'game of chicken' and South Korea relies heavily on both countries as top trade partners."
Heo Yoon, professor of international studies at Sogang University, agreed on the difficulties, noting that China could use the FTA talks as part of its broader strategy to drive a wedge between the US and its closest Asian allies.
'This may be part of China's long practice of a wedge strategy of getting in-between when a crack appears among America's traditional allies, said Heo. 'Korea and Japan are both hit hard by the tariffs and China is trying to pull them closer. But if the US perceives Korea as drifting into China's orbit -- especially during a period without a president in Korea -- the consequences could be significant."
Another industry watcher who wished to be unnamed echoed this view, noting that China is seizing on the current challenges as an opportunity to shore up ties with America's closest allies in the region. "China has been the most vocal in pushing for the FTA and is working to amend ties with the two countries, while Korea and Japan are being more careful, mindful of their relations with the US," the watcher said.
Serving as leverage, message
The evolving dynamic in East Asia also caught attention in Washington. A US senator recently sounded the alarm over the apparent closeness among the three countries, describing the photograph of the three ministers joining hands in Seoul as 'the most shocking image.'
'In a truly bizarre turn of events, we forced our allies and adversaries to try to find ways to work together,' said Democratic Senator Brian Schatz on the Senate floor last week, adding that the three countries are discussing an FTA as a response to Trump's policies. 'This is the most shocking image… To see them shaking hands, literally holding hands with a high official from China to indicate they're in this together against us. So it is true that Donald Trump is uniting the world. The problem is, he's uniting the world against us.'
Amid such concerns in Washington, observers here note that the perceived alignment between China and the US' closest Korean allies could send a message to Trump and work as leverage as the tariff talks are underway.
'It can be used as leverage for talks with the US on tariffs,' said Heo, but he called for caution, as appearing too close to China could also prompt a backlash from the US, in his view.
Park of Korea University sees this moment as an opportunity for Korea to expand its global economic presence and diversify trade relations.
'We are living in a time of 'every country for itself.' Under this dynamic, we need a bargaining chip (in talks with the US), to show what we are capable of in the long term," said Park. 'We must engage in active discussions to uphold the liberal economic order because if this liberal order doesn't recover, a small, open economy like Korea cannot survive."
Park added that Korea must work to "expand its economic pie" globally. "We survive by maintaining and growing our economic pie," he said. "If we can't increase our shares in the US market, we have to create new ones elsewhere."
In this context, a Korea-Japan-China FTA could become an important piece of the pie, Park noted, adding that other potential trade deals –- such as the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, a mega deal of 11 Asia-Pacific nations -- could also be viable options.