🚨 Trump to Korea, "Sign Agreement or Face 25% Tariffs"
Today Korean Economic News for Beginners | 2025.09.13
0️⃣ $350 Billion Investment Pressure Intensifies
📌 Trade pressure resumes right after Korean worker release, Japan already accepted unfavorable terms
💬 The Trump administration has resumed trade pressure on Korea. Right after the Korean worker detention issue was resolved, President Trump warned that Korea must sign a $350 billion US investment agreement or face 25% high tariffs. This is the same condition Japan has already accepted, with a very unfavorable structure where the US takes 90% of investment profits. President Lee Jae-myung strongly opposed this as a "signing without benefits," but the US is using even the Hyundai worker detention incident as a pressure card to increase negotiation pressure. Industry experts worry that if Korea gives in like Japan did, it could seriously damage Korea's economic sovereignty in the long term.
1️⃣ Easy Explanation
The US is forcing Korea to make huge investments while threatening "you'll face tariff bombs if you don't." This is similar to a strong student telling a weak student "I'll bully you if you don't do my homework for me."
Let me explain the situation first. The US is asking allies like Korea and Japan to make large investments to build factories and create jobs in America. The problem is that the investment conditions are very unfair.
Japan's case shows how serious this is. Japan has already accepted US demands and signed an investment agreement, but the content is shocking. Even though Japan invests money to build factories and do business in America, the US takes 90% of the profits from that business, and Japan only gets 10%.
For example, if Japan invests $10 billion and creates a business that makes $1 billion profit per year, Japan only gets $100 million while the US takes $900 million. It's a strange deal where Japan does the investing but the US takes most of the profits.
The US justifies these unfair conditions by claiming they're giving the "privilege of doing business in America." They also have the powerful weapon of tariffs, so they can threaten "if you don't like it, try competing in the US market with 25% tariffs."
Let me explain how deadly 25% tariffs are. If Korea exports a $100 product to the US, $25 in tariffs would be added, making it cost $125. This would completely destroy price competitiveness, making it almost impossible to sell Korean products in the US market.
The reason the Korean government refuses to sign this agreement is clear. If they have to invest a huge amount of $350 billion and still give most of the profits to the US, it's basically like "giving money away for free." This is why President Lee Jae-myung called it "signing without benefits."
But the US isn't giving up easily. They're even using the recent incident where Hyundai workers were detained in the US as a pressure card. They're sending a strong message that "Korean companies must accept our conditions if they want to do business in America."
In the end, this issue isn't just simple trade negotiation, but an important turning point that will decide whether Korea can protect its economic sovereignty.
2️⃣ Economic Terms
📕 Tariff
A tariff is a tax on goods coming from foreign countries, used to protect domestic industries or as a pressure tool in trade negotiations.
- A 25% tariff means paying an extra $25 on a $100 product.
- Higher tariffs make imported goods more expensive, making domestic products relatively more competitive.
- The Trump administration actively uses tariffs as diplomatic pressure tools.
📕 US Investment Agreement
A US investment agreement is a contract that sets conditions and procedures when foreign companies or governments invest in America.
- Key contents include investment size, business areas, and profit distribution structure.
- In Japan's case, they accepted unfavorable terms where the US takes 90% of investment profits.
- Such agreements can greatly increase the economic burden on investing countries, requiring careful review.
📕 Economic Sovereignty
Economic sovereignty is a country's right to independently decide its own economic policies and direction.
- Unequal trade agreements can weaken economic sovereignty.
- Giving in to foreign pressure and accepting unfavorable conditions can risk long-term economic dependence.
- Protecting economic sovereignty is one of the core considerations in national policy.
📕 Protectionism
Protectionism is a policy of strengthening tariffs or import restrictions to protect domestic industries.
- The Trump administration's "America First" policy is a typical protectionist policy.
- While it helps domestic industries in the short term, it can shrink global trade in the long term.
- It also risks triggering trade wars through retaliatory tariffs.
3️⃣ Principles and Economic Outlook
✅ US Negotiation Strategy and Pressure Mechanisms
Let's analyze why the Trump administration uses such forceful methods and what effects they're aiming for.
First, the US is using 'market access rights' as their biggest negotiation card. The US market is one of the world's largest consumer markets. For Korean companies, the US market is a key driver of sales and growth, so being excluded from this market would be fatal. The Trump administration knows the importance of the US market well, so they pressure by saying "accept our conditions if you want to do business in our market." The 25% tariff threat essentially means "we'll kick you out of the US market."
Second, they're deliberately using the Hyundai worker detention incident as psychological warfare tactics. On the surface, it was treated as a labor law violation issue, but in reality, it's sending a message to the Korean government that "you don't know what might happen to Korean companies in America if you don't cooperate." This is interpreted as a political pressure tool, not just a legal issue. By resuming investment agreement pressure right after releasing Korean workers, the US made it clear that the two issues are connected.
Third, they're trying to create a 'precedent effect' through Japan's case. Since Japan has already accepted unfavorable conditions, they can pressure Korea with the logic "Japan did it, so why won't Korea?" They're also aiming for a warning effect to other allies: "refuse and you'll face tariff bombs like Korea." This is a strategic approach to control multiple countries with one success.
US pressure has strategic purposes beyond simple economic benefits - maintaining global hegemony.
✅ Lessons from Japan's Case and Implications for Korea
Let's look at what conditions Japan accepted and what lessons this gives Korea.
First, Japan's '90:10 profit distribution' structure essentially means economic dependence. A structure where the US takes most profits even though Japan invests capital and technology cannot be called a normal business relationship. This has the same effect as Japan paying 'taxes' to the US. Even if Japanese companies work hard in America, most of the results contribute to the US economy, which could lead to Japan's economic weakening in the long term. There are also concerns about technological dependence as Japan's advanced technology and know-how are transferred to the US.
Second, there are complex factors behind Japan's acceptance of these conditions. Japan sees cooperation with the US as essential for containing China, and accepted economic losses due to the importance of their security alliance. The situation where Japan's economy hasn't escaped long-term stagnation and dependence on the US market has increased also influenced this decision. However, there are many critical views within Japan about the long-term negative effects this choice might have on Japan's economy.
Third, Korea still has room to make different choices than Japan. Korea has core technologies that the US needs, like semiconductors, batteries, and shipbuilding, so it may have stronger negotiating power than Japan. Especially Samsung and SK Hynix's advanced semiconductor technology is at a level that even the US cannot easily replace. Also, Korea has stronger economic ties with China than Japan, so there are options to somewhat diversify dependence on the US. Therefore, there's room to seek alternatives rather than unconditionally giving in.
Japan's case can be a 'bad precedent' for Korea, but it's also an opportunity to learn lessons.
✅ Korea's Response Strategy and Long-term Impact
Let's analyze how Korea can overcome this crisis and what results each choice might bring.
First, Korea can expand negotiation space through a 'selective cooperation' strategy. Rather than rejecting all US demands, they could cooperate on parts that benefit Korea while refusing unilaterally unfavorable conditions. For example, they could accept building semiconductor or battery factories but propose more fair adjustment of profit distribution structure. They could also consider dividing investment size into stages and expanding based on results. This way, they can maintain relations with the US while protecting Korea's core interests.
Second, it's important to gradually reduce US dependence through diversification strategies. They need to strengthen cooperation with other major markets like the European Union, Southeast Asia, and India to escape excessive dependence on the US market. Especially in Korea's main industries like K-culture, IT, and bio sectors, there's sufficient growth potential in regions other than the US. In the medium to long term, such diversification will create a stronger position in negotiations with the US.
Third, domestic political unity and national consensus formation are essential. To stand up to US pressure requires strong domestic unity. The government must transparently explain the situation to citizens and gain understanding about why unfair conditions must be rejected. Companies must also cooperate for long-term benefits even if they endure short-term losses. There needs to be consensus that protecting the country's overall economic sovereignty is more important than temporary export damage.
Korea's choice is an important turning point that will determine Korea's economic direction for decades, beyond just the results of this negotiation.
4️⃣ In Conclusion
Trump's investment agreement pressure is a major challenge testing whether Korea can maintain economic independence. While it appears to be an issue of investment and trade on the surface, it's actually a matter where Korea's economic sovereignty and future are at stake.
As seen in Japan's case, accepting US demands as they are might avoid tariff bombs in the short term, but risks falling into economic dependence in the long term. If Korea invests but the US takes most of the profits, this is closer to one-sided exploitation than normal economic cooperation.
However, Korea is not completely powerless. World-class semiconductor and battery technology, along with various innovative technologies, are assets that the US also needs. Also, Korea has more diverse negotiation options than Japan, so if they respond wisely, they could find reasonable compromise points that help both countries.
Most importantly, they need courage not to fear short-term losses. If 25% tariffs are imposed, there will certainly be difficulties, but they won't last forever. US companies also need Korean products, and US consumers don't want price increases either.
President Lee Jae-myung's "signing without benefits" statement seems like a very appropriate judgment in this context. For the country's long-term interests, sometimes difficult choices must be endured, and unfair pressure must be firmly resisted.
In the end, this issue is also a test of whether Korea can emerge as a true economic powerhouse. If Korea responds confidently without giving in to US pressure, Korea can build a more independent and strong economic structure. While it's a difficult time, this should be used as an opportunity to prepare for greater leaps forward.
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