Government Focuses on Maximizing Practical Gains Ahead of July 8 U.S. Tariff Deadline

Briefing on the 3rd Korea-U.S. Tariff Technical Meeting

U.S. Strongly Demands Elimination of Non-Tariff Barriers

Delegation Proposes 'Manufacturing Cooperation' Card

The Era of '0% Tariffs' Effectively Over

With about a week left until the U.S. mutual tariff deferment deadline (July 8), even if the tariff negotiations are concluded, it is unlikely that the previous '0% tariff era' will return. The government has acknowledged that 'high tariffs are the new normal' and has decided to concentrate the remaining negotiation period with the U.S. on maximizing practical gains. Some analysts argue that the framework of the Korea-U.S. Free Trade Agreement (FTA) has effectively collapsed.

A senior official from the Ministry of Trade, Industry and Energy, during a briefing on the 3rd Korea-U.S. tariff working and technical meeting held at the Government Complex Sejong on the 30th, stated, "The main focus of this negotiation is to achieve pragmatic results," and "We focused on how to reduce trade imbalances and find mutually beneficial measures while achieving rebalancing." The official explained that theoretical debates—such as whether trade deficits are good or bad or whether U.S. tariffs are right or wrong—do not help in tariff negotiations, which is why a pragmatic negotiation strategy was chosen.

The official emphasized, "No matter how well the negotiations go, the reality is that it is nearly impossible to return to the pre-tariff status quo." Regarding the potential to extend the July 8 deadline, the official commented, "The situation in the U.S. is extremely fluid; nothing is guaranteed, and the negotiations must go until the end."

For now, it appears that the government has begun reviewing the aspects of the U.S. demands that are acceptable. Regarding the specific U.S. demands, the official noted, "Most of what is considered trade barriers by the U.S. has previously been cited in the National Trade Estimate (NTE) report," and "We explained details as necessary and discussed matters that required mutual consideration." The U.S. actively participated in negotiations for three days, both morning and afternoon, with almost all government agencies including the USTR involved.

The U.S. NTE report is a document that summarizes non-tariff barriers by country and is used each year around April for trade policy formulation. This year's report lists non-tariff barriers against South Korea such as restrictions on beef imports over 30 months, regulations on genetically modified crops (GMO), and restrictions on exporting Google’s precision map data. Issues including legal and nuclear power market openings and intellectual property (IP) rights regarding innovative new drugs were also mentioned. Currency and defense cost issues were not raised this time.

The official explained, "The ultimate goal of U.S. tariffs is the revival of U.S. manufacturing, and emphasizing that Korea is a strong partner in this area based on its assets can create a unique deal between Korea and the U.S." If Korean companies invest in the U.S., imports can be reduced, and not only Korean companies but also third-country businesses can benefit from export opportunities. Thus, manufacturing cooperation would help the U.S. address its long-term trade deficit. The official added, "We should highlight major investment commitments such as Hyundai Motor Company, which marks the largest automobile investment in the Trump administration so far, and other manufacturing collaboration opportunities, as these will positively influence the negotiations."

It is also likely that the U.S. insisted on correcting "trade imbalances" by having South Korea increase purchases of U.S. goods. However, given that South Korea's effective tariff rate on U.S. goods is essentially '0%', it is difficult for Korea to swiftly increase imports of American products. The official said, "Because the U.S. is well aware of this point, it is demanding the removal of non-tariff barriers." The U.S. sees itself as experiencing trade deficits because of what it considers "unfair non-tariff barriers." The official also noted, "The imposition of high tariffs is seen by the U.S. as an ideological opportunity to broadly rebalance trade."

Whether any countries will conclude negotiations before July 8, or if Korea will obtain an extension, remains uncertain. The official explained, "Some countries have reached agreements, some may get extensions, and some might face tariffs without deferment," adding, "The U.S. still does not have a fixed format and is internally discussing post-negotiation options while pressing forward with talks."

The delegation also noted some changes in the U.S. position this time. The official said, "Where previously the U.S. position was to only negotiate '15% mutual tariffs' on item tariffs, now they recognize that there is room to discuss item tariffs according to the scale of Korea's commitments."

Regarding the overall outcomes of this technical meeting, the official commented, "While the first and second rounds focused on understanding and listening to U.S. demands, the third meeting was about communicating what Korea can actually offer at a basic level," adding, "There remains a significant gap, but there are now some clarified points."

It was also hinted that the government's objective moving forward is to extend the mutual tariff deferment approaching on July 8. The official concluded, "We will do our utmost to extend the deferment until July 8 so the negotiations can continue."

Reporter: Kim Dae-hoon daepun@hankyung.com