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Trade talks with U.S. could get ugly as experts warn against taking Trump's raw deal

Published: 14 Sep. 2025, 17:38 Updated: 14 Sep. 2025, 19:06

President Donald Trump listens during a meeting with Korean President Lee Jae Myung in the Oval Office of the White House in Washington on Aug. 25. [AP/YONHAP]

WASHINGTON — Minister of Trade, Industry and Energy Kim Jung-kwan returned to Incheon International Airport on Sunday after a trip to the United States for detailed tariff negotiations, but he declined to answer questions about the outcome — a silence widely seen as reflecting the lack of tangible progress.

Kim traveled more than four hours by road from Washington to New York to meet U.S. Commerce Secretary Howard Lutnick, but the talks also seem to have produced no results.

Officials involved in the negotiations said pressure from Washington escalated after Japan signed a deal on Sept. 4 that largely accepted U.S. demands.

“With President Lee Jae Myung stating that 'no agreement against the national interest will be made,' there is also the possibility of drawn-out talks,” one official said.

'Ungodly stupid' for Korea and Japan to take the deal

Dean Baker, a senior economist at the Center for Economic and Policy Research (CEPR), criticized the approach in a Sept. 11 report titled "Japan and Korea should hand money to their exporters rather than Donald Trump."

"Donald Trump has been boasting about his trade deals with Japan and Korea," wrote Baker. "The nature of these commitments is not yet clear, but if they are anywhere close to the way Trump describes them, the countries would be ungodly stupid to take the deal."

A Sept. 11 report titled ″Japan and Korea should hand money to their exporters rather than Donald Trump″ by Dean Baker, a senior economist at the Center for Economic and Policy Research (CEPR) [SCREEN CAPTURE]

Korea and Japan pledged to invest $350 billion and $550 billion, respectively, in the United States in exchange for lowering the Trump administration’s unilateral 25 percent reciprocal tariff and 25 percent tariff on automobiles to 15 percent.

On Sept. 4, Japan agreed that the United States would decide investment projects, that Japan would send funds within 45 days and that proceeds would be split evenly until the investment is recovered — after which the United States would take 90 percent. Negotiations with Korea, however, remain deadlocked.

“It is hard to understand what Japan was thinking when it signed a deal that sets such a bad precedent," said a government official under the condition of anonymity. "Since then, the United States has reset nearly all discussions with Korea back to zero, insisting on terms similar to those imposed on Japan.”

The source added that Lutnick even pointed to the Alaska LNG project, which faces doubts about profitability, as an example of where funds could be placed. “If such a project fails, Japan would lose all of its investment, and even in a success scenario, recovery would take decades,” the source said.

Japanese Prime Minister Shigeru Ishiba resigned on Sept. 7, just after concluding the trade agreement with Washington, saying “now is an appropriate time” to step down.

Japanese Prime Minister Shigeru Ishiba adjusts his glasses during a press conference as he announces his resignation, in Tokyo on Sept. 7. [REUTERS/YONHAP]

President Lee Jae Myung, second from right, and presidential chief of staff Kang Hoon-sik, far right, speak with U.S. President Donald Trump, far left, who is seated at the Resolute desk in the Oval Office of the White House in Washington on Aug. 25. [THE WHITE HOUSE]

'Giving $350 billion to save $12.5 billion'

President Lee Jae Myung said in a press conference on Sept. 11 that “the negotiations, as they stand, are rough, excessive, unreasonable and absurd.”

“We will never make a decision against the national interest, and we will not accept any agreement that lacks fairness and rationality. Please do not blame us for refusing to sign [an agreement with the United States],” he said, suggesting that he is prepared for prolonged negotiations.

One member of Korea’s negotiating team said attempts to earmark $150 billion of the $350 billion investment for shipbuilding — to limit U.S. discretion — had already become “wishful thinking.” With Korea’s foreign exchange reserves standing at just $411.3 billion, the official said, some argue it would be better to absorb the 25 percent automobile tariff than to meet Washington’s demand to provide $350 billion largely in cash.

Baker of the CEPR also noted that if the tariff returns to 25 percent, Korea’s exports to the United States would fall by about $12.5 billion, or 0.7 percent of GDP.

"To protect this $12.5 billion in exports, Trump is demanding that South Korea pay him $350 billion," Baker wrote in the report. "It’s difficult to understand why any country would ever enter into this sort of deal with anyone, especially Donald Trump. They can take one-twentieth the sums being demanded by Trump and use the money to support workers and businesses hurt by the lost exports and come out way ahead."

President Donald Trump, left, shakes hands with Korean President Lee Jae Myung upon his arrival at the White House, Monday, Aug. 25, 2025, in Washington. [AP/YONHAP]

Fears of U.S. election-driven demands

Diplomatic sources warned that under a Japan-style deal, President Trump could demand funds for “pork-barrel projects” in individual states ahead of next year’s local and presidential elections.

“If investment were funneled into local roads or bridges, the recovery rate of the funds would become near zero,” one source said.

Some analysts wager that Japan accepted the deal to buy time by lowering tariffs on automobiles — a key sector — while calculating whether future demands would be more burdensome than the risks of such an investment.

Others argue that Korea should look to the European Union’s approach, which involved $600 billion in voluntary investment by private companies.

"The EU only secured that framework by effectively opening its agricultural market," warned a diplomatic source. “For Korea, where food security issues such as rice and beef are politically and socially sensitive, the cards available in U.S. negotiations are far more limited."

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KANG TAE-HWA [[email protected]]