U.S. throws currency curveball at Korea in tariff talks

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U.S. throws currency curveball at Korea in tariff talks

Published: 25 Apr. 2025, 18:31 Updated: 25 Apr. 2025, 23:43

PARK EUN-JEE
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Audio report: written by reporters, read by AI

Finance Minister Choi Sang-mok, right in the front row, and Industry Minister Ahn Duk-geun, left, are seen leaving the U.S. Department of the Treasury in Washington on April 24 after the first round of tariff talks. [KANG TAE-HWA]

[NEWS ANALYSIS]

The Donald Trump administration threw a curveball at the Korean delegation in the first round of face-to-face tariff talks in Washington on Thursday by pushing to add currency policy to the agenda.

The addition clearly puts additional pressure on Korea as it possesses few policy tools or room to navigate amid the won’s accelerating depreciation.

While the other agenda items announced by the Ministry of Finance and Economy — tariff and nontariff measures, economic security and investment cooperation — were widely expected, U.S. Treasury Secretary Scott Bessent’s proposal was not something Korean media or negotiators mentioned as expected.

Finance Minister Choi Sang-mok, second from left, and Industry Minister Ahn Duk-geun, third from left, brief the press on the outcome of the trade talks with the United States at the Korean Embassy in Washington on April 24. [KIM HYOUNG-GU]

Still, Korea was not entirely at a loss, as the issue of upping defense costs was not included.

Are there more details about the U.S. mention of the currency issue?

Details are scant, but Finance Minister Choi Sang-mok said that Bessent first put the currency issue on the table, with the secretary suggesting that the item be dealt with separately between Korea’s Finance Ministry and the U.S. Treasury Department.

Experts predict that the United States could ask for more effort to ease the won’s persistently steep depreciation against the dollar. Another likelihood is that Washington and Seoul could set a certain won-dollar target.

But the problem is that Korea is left with few policy tools to curb the trend because its central bank has already been selling dollars in an effort to mitigate the won’s weakening.

How much has the won weakened against the dollar?

The won-dollar exchange rate has been on the rise over the past years, but depreciation kicked in sharply at the end of last year due to the domestic political uncertainties sparked by former President Yoon Suk Yeol's declaration of martial law on Dec. 3, 2024, and concerns over U.S. tariffs.

Now, the 1,400-won level against the greenback has become the new normal in currency markets.

Experts have warned that the United States could use the weak won as a bargaining chip in tariff talks. “While Korea already imposes very low import tariffs on U.S. goods under the Korea-U.S. FTA, the United States could argue that Korea’s currency trend constitutes a form of a nontariff barrier,” Park Sang-hyun, a researcher at iM Securities, told the Korea JoongAng Daily.

Was there any good news for Korea?

One aspect involves the deadline for sealing the deal, dubbed the July Package, which was stated as July 8, the day that the 90-day tariff grace period ends.

Given that Korea’s presidential election is set for June 3, the Korean side has hoped that the new government will take the helm in completing the deal.

“We explained that our domestic political schedule, the scope of executive authority and matters requiring legislative approval must be taken into consideration during the negotiation process, and the other side agreed,” Choi said during a press briefing in Washington following the discussion.

But the tone of his U.S. counterpart cast the progress of the talks in a different light.

"We may be moving faster than I thought, and we will be talking technical terms as early as next week […] South Koreans came early, they came with their A game, and we will see if they follow through on that," Bessent said.

When asked what Bessent could have been referring to with his "A game" comment, Industry Minister Ahn Duk-geun suspected that it could be the proposals related to shipbuilding cooperation between Korea and the United States.

“We devoted a great deal of time to explaining our shipbuilding vision, and I think their reaction was positive,” said Ahn during the briefing.

The exclusion of the shared defense costs for U.S. military operations in Korea from the agenda was a relief for the delegation from Seoul.

Choi confirmed that there was no mention of the costs during the talks, and Trump also stated they would be addressed separately, not as part of the tariff-related negotiations.

As for Korea’s participation in the Alaskan gas pipeline project, the Korean negotiators said no concrete decision was made.

Still, Washington aims to bring Seoul on board by June 2, when a summit related to the project takes place in Alaska, according to the New York Times.

BY PARK EUN-JEE [[email protected]]