🚨 Korea-US Trade Talks Postponed Crisis: Tariff Bomb Looms Without Negotiation Table

Today Korean Economic News | 2025.07.25

📌 Korea Can't Even Sit at Negotiation Table with US, 'Tariff Bomb' Fears Become Real

💬 Korea-US 2+2 trade talks were suddenly postponed by the US side, putting Korea's US negotiations in emergency mode. While major trading partners like Japan finished tariff negotiations with the US, Korea is wasting time without even presenting proper negotiation proposals. The possibility of up to 50% reciprocal tariffs being imposed on Korea starting next month is growing, heightening industry tensions. Korea's Deputy Prime Minister for Economy had to cancel his departure at the last minute, and the National Security Office chief who already arrived in the US had to return without meeting anyone. Meanwhile, Japan successfully completed negotiations with the US, agreeing to a 15% tariff rate.

1️⃣ Easy to Understand

An important trade negotiation between Korea and the US was suddenly canceled, putting our country in a very difficult situation. Other countries successfully completed negotiations with the US, but Korea is falling behind alone.

'2+2 trade talks' means a meeting where economic ministers and foreign ministers from both Korea and the US come together to discuss trade issues. This time, Korea's Deputy Prime Minister for Economy and National Security Office chief were supposed to meet with the US Trade Representative (USTR) and Secretary of State.

But one day before the meeting, the US suddenly notified Korea of a postponement, saying there were "scheduling difficulties." Korea's Deputy Prime Minister had to cancel his departure just before boarding the plane, and the National Security Office chief who was already in the US had to return without meeting anyone.

This situation is serious because there isn't much time left. The US is pressuring other countries saying "open your markets more to us, or we'll put high taxes on your products." That deadline is August 1st.

Japan already finished negotiations with the US and agreed to 15% tariffs. Other major trading countries also completed most negotiations, but Korea is still wasting time without even presenting proper negotiation proposals.

If negotiations aren't concluded by August 1st, Korea's major export products like cars, steel, electronics, and semiconductors could face up to 50% tariffs. This would greatly reduce Korean products' price competitiveness and deal a fatal blow to exports.

The current situation is like having an important exam with a set date, where other students have all finished preparing, but we haven't even properly started studying.

2️⃣ Economic Terms

📕 2+2 Trade Talks

2+2 trade talks mean high-level trade negotiations where economic ministers and foreign ministers from both countries participate together.

• It's called '2+2' because 2 economic (trade) ministers and 2 foreign ministers participate.
• It handles important trade issues at a higher level than regular working-level negotiations.
• It's used when resolving trade disputes between countries or concluding new trade agreements.

📕 Reciprocal Tariff

Reciprocal tariff means imposing tariffs at the same level in response to another country's tariff policy.

• It's like "if you put 10% tariffs on our products, we'll also put 10% tariffs on your products."
• It's used to resolve trade imbalances or pressure other countries to open their markets.
• However, it can bring economic losses to both countries, so careful approach is needed.

📕 USTR (US Trade Representative)

The US Trade Representative is the government agency that oversees US trade policy.

• It's the abbreviation for United States Trade Representative, called USTR.
• It handles trade negotiations with other countries, tariff policies, and trade dispute resolution.
• The USTR representative is appointed by the president and has cabinet-level status.

📕 Market Opening

Market opening means relaxing regulations so foreign companies or products can enter the domestic market more easily.

• Lowering or eliminating tariffs is the most common way of market opening.
• It also includes relaxing foreign investment restrictions or reducing service industry entry regulations.
• Market opening provides consumers with more diverse and cheaper products, but can make it difficult to protect domestic industries.

3️⃣ Principles and Economic Outlook

✅ Background and Impact of Korea-US Trade Talk Postponement

• Let's analyze what this negotiation postponement means and its impact on the Korean economy.

  • First, the US postponement is likely a pressure strategy against Korea. The US suddenly postponing the schedule one day before negotiations is interpreted as intentional pressure rather than a simple scheduling issue. The US has already finished negotiations with major trading partners like Japan, EU, and Canada, leaving only Korea behind. This seems to be a strategy to put Korea in a more difficult position and extract favorable conditions for the US. In fact, the US is demanding Korea's car market opening, agricultural imports expansion, and digital tax withdrawal, making it a very unfavorable situation for Korea with limited negotiation cards.

  • Second, other countries' negotiation results are becoming unfavorable precedents for Korea. Japan agreed to a 15% tariff rate in negotiations with the US, but this was the result of paying the price of additional car market opening and agricultural import quota expansion. The EU also avoided tariff increases by temporarily suspending digital tax imposition and relaxing regulations on US companies. However, these precedents are becoming grounds to demand similar levels of concessions from Korea. Especially since Korea continues to have a trade surplus with the US, American pressure is expected to be even stronger.

  • Third, time pressure from negotiation delays is further weakening Korea's negotiating power. As the August 1st deadline approaches, Korea is increasingly being forced to accept even unfavorable conditions. The US will intentionally use this time pressure to extract maximum concessions from Korea. In fact, during past Korea-US FTA negotiations, the US used deadline pressure to push through unfavorable conditions for Korea.

• This negotiation postponement is not a simple schedule adjustment but strategic pressure from the US, and Korea faces an even more difficult negotiation environment.

✅ Specific Impact on Korean Economy if Tariffs Are Imposed

• Let's look at the impact on our economy by industry if 50% tariffs are imposed.

  • First, the auto industry is expected to receive the biggest hit. Hyundai-Kia's US exports are about 800,000 units annually, accounting for 15% of total production. If 50% tariffs are imposed, price competitiveness in the US market will drop significantly, likely reducing exports by 30-40%. This could lead to 15 trillion won in annual sales decrease and 30,000 job losses. Especially since local plants in Alabama and Georgia depend on Korea for a significant portion of parts supply, disruption to the entire business is inevitable. Auto parts companies will also be hit together, raising concerns about significant ripple effects on regional economies.

  • Second, difficulties in traditional manufacturing like steel, shipbuilding, and petrochemicals will worsen. These industries already struggling with China's oversupply and global economic slowdown could face threats to survival itself if tariff imposition is added. POSCO's US steel exports are about 2 million tons annually, and if exports stop due to 50% tariffs, annual sales losses of 1 trillion won are expected. The shipbuilding industry could also face setbacks in US exports of high-value ships like LNG carriers and container ships, falling behind in order competition. The petrochemical industry depends on the US for a significant portion of raw material procurement, so cost burdens are expected to surge if tariffs are imposed.

  • Third, semiconductor and electronics sectors will also find it hard to avoid indirect hits. While not direct tariff targets, restrictions in technology cooperation or supply chains could arise from overall Korea-US trade relationship deterioration. Especially if Korea is excluded from US semiconductor alliance policies, it could suffer greater long-term losses. With Samsung Electronics and SK Hynix proceeding with large-scale US investments, investment plans could also face setbacks if tariff conflicts intensify.

• Tariff imposition could go beyond simple export reduction to bring overall competitiveness weakening of the Korean economy and status decline in global supply chains.

✅ Korea's Response Strategy and Future Outlook

• Let's explore strategies Korea can take in the current crisis situation and long-term response plans.

  • First, multi-faceted contacts for urgent negotiation resumption are needed. The government should continue working-level contacts despite US negotiation postponement and also pursue bypass negotiations through private channels. Especially, Korea's position should be actively appealed through US Congress and industry officials, presenting mutually beneficial negotiation proposals. Given the tight timeframe, presidential-level direct communication should also be considered. Also, it's important to prepare specific and realistic negotiation proposals in advance so that substantial results can be achieved immediately when negotiations resume.

  • Second, requesting to delay tariff imposition timing or gradual application is also an important strategy. Even if complete negotiation conclusion is difficult, Korea can negotiate to postpone tariff application or apply it gradually. For this, Korea needs to present sincere concession proposals while buying time. For example, preemptively proposing partial car market opening or specific agricultural import expansion, and securing negotiation time based on this can be considered. Even accepting temporarily unfavorable conditions is more important than avoiding the tariff bomb.

  • Third, long-term strategy is needed to reduce US dependence and diversify export markets. This incident clearly shows the risks of an export structure overly dependent on specific countries. Export expansion to emerging markets like China, Europe, Southeast Asia, and India along with discovering new growth engines is urgent. Especially, competitiveness in future industries like eco-friendly energy, bio, and digital technology should be built to reduce dependence on the US market. Also, actively utilizing multilateral trade agreements like RCEP and CPTPP is an important strategy.

• Short-term focus should be on emergency response to avoid the tariff bomb, while long-term transition to a more balanced economic structure is needed.

4️⃣ In Conclusion

The postponement of Korea-US 2+2 trade talks is a very serious crisis signal for the Korean economy. While other major countries have already completed negotiations with the US, only Korea is falling behind, and the August 1st deadline is approaching.

The fundamental problem of this incident is Korea's belated response to US negotiations. Despite US protectionism strengthening and reciprocal tariff policies being predictable scenarios, Korea tried to enter negotiations without sufficient preparation. Meanwhile, Japan and Europe set response strategies early and successfully completed negotiations.

If 50% tariffs are imposed starting next month, Korea's main export industries like automobiles, steel, shipbuilding, and petrochemicals will suffer fatal damage. This is likely to lead beyond simple export reduction to job losses and economic growth slowdown.

Even now, the government should mobilize all available diplomatic channels for negotiation resumption. Sometimes accepting unfavorable conditions may be better than the tariff bomb. The important thing is to buy time and create opportunities for renegotiation under better conditions.

Long-term, this crisis should be a lesson to improve the export structure that's overly dependent on the US. An economic constitution that doesn't shake with specific countries' policy changes should be built through export market diversification and discovering new growth engines.

Crisis sometimes becomes opportunity. This incident should be used as a turning point for Korea to develop into a more balanced and resilient economic structure. However, avoiding the immediate tariff bomb is the top priority task.