Seoul scrambles for investment package to appease Trump as clock ticks

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Seoul scrambles for investment package to appease Trump as clock ticks

Published: 27 Jul. 2025, 18:30

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

A 3D-printed model of U.S. President Donald Trump, the Korean flag and the word ″Tariffs″ are seen in this illustration from July 23. [REUTERS/YONHAP]

[NEWS ANALYSIS]

In what appears to be a diminishing role at the negotiating table with U.S. President Donald Trump over tariffs, Korea is poised to engage in an eleventh-hour round of deliberations in the final five days, making a final push to avoid being the last at the plate and bearing the brunt of the disadvantages.

Talks are underway about the possible creation of a $100 billion investment package, but it still falls far short of Japan’s $550 billion pledge, leaving it highly uncertain whether Seoul can win over Trump and secure its desired terms — a "reciprocal" tariff rate of 15 percent and slashed auto tariffs of 15 percent.

Adding to the uncertainty, talks between Korean Deputy Prime Minister and Finance Minister Koo Yun-cheol and U.S. Treasury Secretary Scott Bessent have been scheduled for July 31 — just one day before the waiver deadline — also prompting skepticism over the feasibility of concluding negotiations and setting up details before Aug. 1.

“It has been confirmed that the United States is showing strong interest in our shipbuilding sector, and agricultural products have also been included in the scope of negotiations,” said an official from Seoul's presidential office. Korea is initiating a two-track strategy with Trade Minister Yeo Han-koo focusing on talks related to agriculture, livestock and digital trade, while Industry Minister Kim Jung-kwan is overseeing coordination in manufacturing and energy.

U.S. beef products are on sale at a discount mart in downtown Seoul on July 27. [NEWS1]

Left on the sidelines, must pay the price

Bessent unilaterally canceled a planned face-to-face meeting with Koo on July 24, just one day before the scheduled date, fueling speculation that Washington may have found Seoul’s proposals unsatisfactory.

Experts caution that with Japan having already concluded its deal, any delay in Korea’s negotiations relative to the European Union could place Seoul at a significant disadvantage and result in considerable economic repercussions.

The postponement was officially attributed to Bessent’s “urgent schedule," with foreign reports noting that an emergency meeting between President Trump and European Commission President Ursula von der Leyen was set to take place in Scotland on Sunday, followed by Bessent’s third round of high-level trade talks with Chinese Vice Premier He Lifeng in Stockholm on Monday and Tuesday.

“If the United States makes significant concessions to other countries, Trump, who will be under pressure to deliver results, will likely seek greater gains elsewhere,” said Woo Seok-jin, an economics professor at Myongji University.

“There’s a strong chance that Korea will be the one to bear that burden.”

The EU is reportedly pushing for an agreement similar to Japan’s, which would impose a 15 percent tariff, including on automobiles.

Export-bound Kia cars are parked at Pyeongtaek Port in Gyeonggi on July 7. [NEWS1]

Seoul’s investment proposal: Enough to satisfy U.S.?

Korea is reportedly preparing a $100 billion investment fund, a consolidated package of investment pledges from the country’s major conglomerates, but many believe the amount is unlikely to satisfy Washington’s expectations.

Behind Japan’s much larger $550 billion commitment lies a broader context: from the beginning of Trump’s first term in 2017 through 2024, the U.S. trade deficit with Japan is projected to total $528.5 billion.

Japan initially proposed a $100 billion investment during early negotiations in May, but Trump pushed that figure up to $550 billion — effectively offsetting eight years of trade imbalance in a single stroke.

Applying the same logic to Korea, the U.S. trade deficit with Seoul over the past eight years amounts to $276.5 billion. Bloomberg reported on July 23 that U.S. Commerce Secretary Howard Lutnick had asked Korea to invest $400 billion, citing unnamed sources familiar with the discussions.

“We need to be willing to put certain things on the table; beef, for instance. It’s not as if everyone who eats beef over 30 months old ends up with mad cow disease,” said Kang In-su, an economics professor at Sookmyung Women’s University.

“Washington has justified its 25 percent tariffs against Korea by pointing to what it sees as Korea’s nontariff barriers that it claims are equivalent to some 50 percent of tariffs on the U.S.,” he said.

Korea’s reported $100 billion investment fund is expected to include Hyundai Motor Group’s $21 billion investment announced at the White House in March, Samsung Electronics’ $37 billion investment in a Texas plant and SK hynix’s $3.87 billion investment in an Indiana factory.

Korean Air has signed $32.7 billion in supply deals with Boeing and GE Aerospace, covering aircraft and aircraft engine procurement.

Hyundai Motor Group Executive Chair Euisun Chung delivers remarks as U.S. President Donald Trump, second from right, stands in the Roosevelt Room at the White House in Washington on March 24. [AP/YONHAP]

Talks collapse, economy derails

Failure to reach a final tariff agreement could deal a significant blow to Korea’s manufacturing-dependent economy, potentially reducing real GDP by 0.4 percent, according to a state-run think tank.

Manufacturing accounted for 27.6 percent of Korea’s GDP as of 2023, according to the National Assembly Budget Office, the second-highest share among member states of the Organisation for Economic Cooperation and Development (OECD) and well above the OECD average of 15.8 percent.

The Korea Institute for International Economic Policy (KIEP) estimates that if reciprocal tariffs and auto tariffs of 25 percent are implemented, it could lead to a 0.3 to 0.4 percent decline in Korea’s real GDP.

“The impact will be larger for Korea if neighboring countries like Japan succeed in cutting their rates in negotiations,” KIEP senior researcher Kim Young-gui told the Korea JoongAng Daily, adding that the projection was made on the scenario that Korea and all other partner countries fail to negotiate. “

The impact of tariffs has already begun to take a toll.

Hyundai Motor and Kia reported a combined 6.34 trillion won ($4.58 billion) in operating profit in the second quarter, a 19.6 percent drop on year. Hyundai’s profit was slashed by 828.2 billion won, while Kia’s slid by 786 billion won, impacted by the 25 percent U.S. tariff on foreign automobiles, which took effect in April.

However, the situation is expected to deteriorate further as second-quarter earnings did not fully reflect the impact of the 25 percent tariffs, as many vehicles sold during that period came from inventory. The full impact of the tariffs could amount to a fall of some 3 trillion won per quarter.

"The U.S. tariffs began taking full effect from May, and with the second half of the year in view, we are heading into a period that will reflect the full brunt of the measures, making the situation even more challenging,” said Kim Seung-jun, chief financial officer at Kia, during a conference call on Friday.

BY SARAH CHEA [[email protected]]