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Trump could hold up South Korea trade deal until pact with North Korea reached

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Capital Markets View – January 2021


Trump could hold up South Korea trade deal until pact with North Korea reached

President Donald Trump said March 29 that he may delay a free trade agreement with South Korea until a nuclear deal is reached with North Korea, despite touting the revamp of the trade pact as a "wonderful deal."

Speaking at an event on infrastructure in Ohio on March 29, Trump said he will use negotiations with North Korea over its nuclear program as a leveraging tool before the new South Korea trade deal is completed. Earlier in March, Trump agreed to meet with North Korean leader Kim Jong Un at a summit sometime this spring.

"I may hold it up until after a deal is made with North Korea," Trump said. "Do you know why? Because it's a very strong card. And I wanna make sure everyone is treated fairly and we're moving along very nicely with North Korea. We'll see what happens."

"South Korea has been wonderful, but we'll probably hold that deal up for a little while. See how it all plays out," he added.

The Trump administration said on March 27 that the U.S. and South Korea have agreed in principle on a revised United States-Korea Free Trade Agreement, which went into effect in 2012 under the Obama administration. The Trump administration has made reducing the $22.9 billion trade deficit with South Korea a priority, which it says is caused by an imbalance in auto trade and a stifled export market for U.S. carmakers.

Under the amended trade pact, the U.S. will extend its 25% tariff on imports of Korean pickup trucks by 20 years and will also double the number of automobiles U.S. carmakers can export to South Korea under U.S. safety standards to 50,000 per year from the previous cap of 25,000 per year.

As part of the agreement, South Korea will also be exempt from Trump's 25% tariff on U.S. steel imports, though their imports of steel into the U.S. will be subject to a product-specific quota equivalent to 70% of the average annual import volume between 2015 and 2017.

"We were in a deal that was a horror show," Trump said. "We've redone it and that's gonna level the playing field on steel and cars and trucks coming into this country."

The revamped trade deal is still subject to U.S. and South Korean domestic review procedures.