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Korea watches closely as U.S., Vietnam close trade deal

Published: 03 Jul. 2025, 19:23 Updated: 03 Jul. 2025, 20:08

U.S. President Donald Trump speaks to reporters in the Oval Office of the White House in Washington D.C. on May 23. [AP/YONHAP]

The United States reached a trade agreement with Vietnam on Wednesday, easing reciprocal tariffs in exchange for Hanoi opening its market more widely to U.S. companies. This marks Washington’s second deal of its kind since launching tariff negotiations on April 9, following an earlier agreement with Britain.

For Korean companies that have invested heavily in Vietnam, the pact comes as welcome relief. The country stands as Korea’s third-largest trading partner after China and the United States.

Giants like Samsung have shifted production bases to Vietnam to benefit from low labor costs and proximity to China. Korean exporters ship intermediate goods there, which Vietnam then assembles into finished products for export to the United States. Lower tariffs are expected to lighten the load on these Korean operations.

U.S. President Donald Trump announced the deal with Hanoi in a Truth Social post on Wednesday, saying Washington would impose a reduced mutual tariff of 20 percent on Vietnamese goods, down from the initially set 46 percent.

He added that "transshipped" goods — products routed through Vietnam to dodge duties — would face a 40 percent tariff.

Vietnam, in turn, offered "zero" tariffs on U.S. goods to clinch the agreement, according to Trump.

According to a draft joint statement obtained by Politico, Vietnam pledged to dismantle non-tariff barriers tied to intellectual property rights and grant the United States priority access to its market for poultry, pork and other agricultural products, along with industrial manufactured goods.

A container is loaded onto a cargo ship while docked at Hai Phong port in Hai Phong, Vietnam, on April 16. [REUTERS/YONHAP]

The developments carry important signals for Korean trade officials. Seoul maintains a smaller trade surplus with the United States than Vietnam does, and crucially, is already bound by a free trade agreement (FTA).

This strengthens Korea’s position in arguing for reductions in the 25 percent mutual tariff that Washington previously proposed, as well as in item-specific tariffs, such as the 25 percent tariff on automobiles and the 50 percent tariff on steel.

Still, much hinges on how far Seoul is willing to meet Washington’s demands for market opening. The United States has pressed Korea on issues such as fair competition rules for online platforms, network usage fees, approval for exporting Google’s detailed maps, and lifting a restriction on importing beef older than 30 months.

However, these issues are intertwined with domestic interests, meaning that any concessions by Seoul could spark a public backlash. Securing the best possible deal with Washington will require careful negotiation, as well as the challenging task of persuading the Korean public.

Some analysts caution against drawing direct parallels between Vietnam’s concessions and Korea’s talks.

"This is forcing a smaller country to eat it," said Mary Lovely, senior fellow at the Peterson Institute for International Economics, in an interview with the AP.

The researcher doubted whether Trump would be able to impose similarly lopsided deals on major partners like the European Union (EU) or Japan, the report said.

Heo Yoon, a professor at Sogang University’s Graduate School of International Studies, argued that the United States is likely to treat Korea differently.

“Korea is one of the few countries with an FTA with the United States. It’s a manufacturing powerhouse, and the United States needs Korean cooperation across many areas,” he said. “Given President Trump’s strategic push to exclude China, Washington can’t afford to handle Korea the same way they do Vietnam.”

A senior Korean official also pointed out that "Korea’s economic structure makes outcomes from negotiations with Japan, the EU and Canada more critical benchmarks."

Trade Minister Yeo Han-koo presides over the 48th Trade Promotion Committee meeting at the Korea Trade Insurance headquarters in Jongno District, central Seoul, on July 3. [MINISTRY OF TRADE, INDUSTRY AND ENERGY]

The deal with Vietnam adds urgency for Seoul. As the tariff grace period is set to expire on July 9, the United States has begun ramping up pressure on Japan to finalize its own agreement.

Korea’s trade authorities convened a strategy session on Thursday to fine-tune their approach.

“We’re in a grave situation with the tariff pause set to expire on July 9, and the possibility of new tariffs for some countries,” said Yeo Han-koo, Korea’s chief trade negotiator. “Major economies are rushing to wrap up last-minute deals with the United States, and we’ll do everything to secure terms no worse than theirs.”

The government plans to brief the National Assembly on its negotiation roadmap on Friday. Yeo is also set to fly to the United States this weekend for ministerial-level talks, around a week after returning from his first high-level discussions under the new administration.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY KIM WON [[email protected]]