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Korea should not rush tariff talks with the United States

Published: 22 Apr. 2025, 00:01

Shin Min-young

The author is a visiting professor of economics at Hongik University.

The tariff war launched by the second Donald Trump administration is deepening global economic uncertainty and triggering sharp volatility across financial markets. Amid growing turmoil in equities, foreign exchange and bonds, the United States announced on April 9 a 90-day suspension of reciprocal tariff measures on 75 countries that signaled a willingness to negotiate.

Vehicles bound for export are parked at Pyeongtaek Port in Gyeonggi on April 10. [NEWS1]

Despite the administration’s confidence in its protectionist strategy, the broader picture is becoming increasingly unstable. U.S. President Donald Trump has stated that his objective is to bring down long-term interest rates, yet the bond market is reacting in the opposite direction. Even with the dollar falling in value, the yield on 10-year U.S. Treasuries has surged past 4.5 percent, reflecting investor unease.

Concerns are not limited to financial markets. Analysts in New York warn that an extended trade conflict could tip the U.S. economy into recession. Discontent is spreading at home as well. Demonstrations against Trump’s tariff policies are gaining traction nationwide. Notably, some of the same voters who supported Trump in protest against inflation under the Biden administration are now joining these rallies, frustrated by the renewed uncertainty and higher prices.

Japanese Prime Minister Shigeru Ishiba speaks to reporters after a Japanese negotiator held ministerial talks at the White House regarding U.S. tariffs, at the Prime Minister’s official residence in Tokyo, Japan, on April 17. [REUTERS/YONHAP]

Following the 90-day suspension announcement, Korea was named one of five priority negotiating partners along with Japan, Britain, India and Australia. Washington likely selected these countries not only for their alliance value but also because they are perceived as easier counterparts with whom the U.S. can strike favorable early agreements.

The strategy appears to be sequential: Secure quick wins with friendly nations, then use those agreements as leverage in more difficult negotiations with countries like China and the European Union. In this context, the United States is seeking momentum rather than balance.

Deputy Prime Minister Choi Sang-mok and Trade Minister Ahn Duk-geun are scheduled to travel to the United States on April 22 to attend the spring meetings of the International Monetary Fund and the World Bank. On April 24, they will participate in a “2+2” economic dialogue involving senior U.S. officials from the Treasury and Commerce Departments.

Given the rapidly evolving situation in Washington and Korea’s own domestic circumstances, the key message for Seoul is clear: There is no need to rush. Korea would be better served by observing the trajectory of talks between the United States and other priority countries before finalizing its own position.

The 90-day window offers valuable breathing room, particularly since the Korean government had limited time to prepare for negotiations. A hasty deal now could result in unfavorable terms that bind Korea's future economic policy for years to come.

Even Japan, which held a round of cabinet-level talks last week, has expressed caution. Japanese Prime Minister Shigeru Ishiba acknowledged that negotiations would be difficult. The Trump administration’s erratic track record and transactional mindset leave little room for predictability. Even signed agreements may be subject to reversal under changing political winds.

Indeed, if domestic opposition intensifies or if the U.S. economy weakens, Trump may be forced to ease his tariff stance under public and congressional pressure. For Korea, maintaining strategic ambiguity while delaying final commitments could prove to be a prudent path forward.

Another critical factor is Korea’s current leadership structure. With President Yoon Suk Yeol's removal from office, the country is being led by Prime Minister Han Duck-soo in an acting president capacity. In this context, it is neither necessary nor advisable for the current government to finalize sweeping trade agreements. Instead, it would be more appropriate to treat ongoing talks as preliminary groundwork for the next administration, which will take office on June 4.

Paul Ivanov chants slogans during a protest against the Trump administration on April 19 in Miami. [AP/YONHAP]

This transitional status should be clearly communicated to Washington. It is important that Korean negotiators focus not on concluding deals but on preserving flexibility for the incoming government.

In parallel, there is no urgency to make early concessions on sensitive issues such as liquefied natural gas imports, defense cost-sharing, trade imbalances or shipbuilding cooperation. Premature commitments on these fronts could hinder the policy freedom of the next government and limit Korea’s strategic options for the next decade or more.

Policymakers must also remain vigilant against what economists call the “principal-agent problem.” In this scenario, the government, acting as the agent of the public, might mistake a quick agreement for a diplomatic success — even if the outcome runs counter to long-term national interest. Such misjudgments are particularly dangerous during leadership transitions.

Recent history has shown that the Korean public is highly attuned to such matters. During the political crisis surrounding martial law last December, citizens demonstrated a strong sense of civic responsibility and democratic maturity. That same awareness will now be focused on the tariff negotiations. The public will closely watch whether their representatives are acting in the interest of the country or rushing for short-term accolades.

The acting administration’s role in these negotiations should be viewed as laying the foundation for the incoming government. It is not expected to complete the structure, but to ensure that construction begins on solid ground.

Employees work at NPD Technology, a factory that assembles printed circuit boards (PCBs) for the automotive industry and exports them to the United States, in Ciudad Juarez, Mexico, January 29, 2025. [YONHAP/REUTERS]

A cautious, measured approach is warranted. Where possible, major decisions should be deferred. At the same time, Korea should avoid appearing obstructionist or overly self-serving. The goal should be to seek a point of balance between the interests of both nations.

Such an approach could enhance Korea’s credibility in the international arena. Other countries watching Korea’s response to the U.S. tariff agenda may find a model for how to engage with a powerful but unpredictable partner. If handled wisely, Korea’s conduct in these negotiations could elevate its global standing and demonstrate the quiet strength of a democratic and strategically agile state.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.