Korea, Japan, China to push for trilateral FTA to take on Trump’s tariffs

 

Korea will promptly push for a trilateral FTA with Japan and China in a bid to jointly tackle U.S. President Donald Trump’s aggressive tariff tussle as his massive reciprocal tariffs took effect on April 9.

The Korean government held a ministerial meeting led by Finance Minister Choi Sang-mok on April 9 and announced that efforts will proceed to establish the trilateral FTA “at the earliest possible moment,” while rolling out already-sealed agreements.

Though the move was downplayed by acting President Han Duk-soo’s indication that he “will not take that route” in a recent interview with CNN on April 8, the three-sided agreements will likely work as a breakthrough against Trump’s massive tariffs on products from the three Asian countries. On top of 25 percent universal car tariffs, Korea was slapped with reciprocal tariffs of 25 percent, while Japan’s tariffs stood at 24 percent and China at 104 percent.

First initiated in 2012, the three countries went through 16 rounds of official negotiations for the trilateral agreement. The combined GDP of the three countries makes up 22.4 percent of the world total, with their trade accounting for 18.3 percent, according to the International Monetary Fund.

Seoul also said it would push for the withdrawal of 5 percent tariffs by the United Arab Emirates, agreed to in 2023, sooner than initially agreed 10 years. Korea and Ecuador agreed to abolish their tariffs of up to 40 percent 15 years after their implementation the same year, but will propel it to within this year.

“Korea will also resume talks with Mexico shortly on an FTA to diversify and maximize domestic companies’ exports,” said Park Dong-il, director general for the manufacturing industry at the Ministry of Trade, Industry and Energy.

The drastic moves come as Korea lags behind others in negotiations with Trump as other countries like Japan and China are making daring and assertive moves to counter the tariffs, with Seoul opting to draw up a series of financial support plans — both insufficient and late — that can be little more than a stopgap.

The Trade Ministry said it will offer an additional 3 trillion won ($2 billion) in state-backed financing for auto-related firms, while also postponing corporate tax filing by up to nine months.

The packaged financial support is concentrated on small- and medium-sized auto parts makers, which includes loans and guarantees, as well as some policies like expanding loan limits and lowering interest rates and insurance costs.

Trump declared 25 percent tariffs on auto parts, which will also take effect on May 3. Automakers like Hyundai Motor and Kia have been responding to the tariffs by opening new plants in the United States, but smaller Korean component makers are not capable of making big investments.

“Korea’s roughly 20,000 auto parts makers are small in size with lower profitability in manufacturing, and if exports drop sharply due to the tariffs, it will lead to job losses and threaten the ecosystem of the local industry,” said Park Tae-hyun, director at the automobile division at the Trade Ministry.

Korea exported a total of 2.78 million cars in 2024, and of them, 52 percent were exported to the U.S. market. In the auto parts sector, the United States was the No. 1 export destination with $8.2 billion as of last year.

Experts, however, warn that the financial programs could be a white elephant if they miss the most substantial objective: launching actual negotiations that can minimize the damage to Korean companies.

“Amid the leadership vacuum, it seems like the Trump administration put Korea’s task force team in a completely lower league,” said Kang In-su, an economics professor at Sookmyung Women’s University.

“The Korean government must show more gumption and take the initiative in the negotiations to bring actual profits to the country.”

Japanese Prime Minister Shigeru Ishiba spoke with Trump on the telephone on April 7 and asked him to “reconsider” the levies it has imposed on Japan, which was hit with reciprocal tariffs of 24 percent, lower than for Korea, though it doesn’t have an FTA with Washington like Seoul does.

“We had a very good conversation,” Trump said, recalling talks with Ishiba. “So we have a great relationship with Japan. We’re going to keep it that way.”

China, meanwhile, announced that it would retaliate with an extra 34 percent in levies on all U.S. goods from April 10, matching Trump’s latest additional reciprocal tariffs against the country. The White House, in turn, imposed an extra 50 percent in tariffs on Chinese goods, which hiked its total tariff rate to 104 percent.

Vietnam offered to completely eliminate tariffs on U.S. goods as a negotiation card, while the Philippines and Cambodia also promised to lower tariffs on U.S. imports. Indonesia is mulling an expansion of U.S. imports of wheat, oil and gas to reduce its trade surplus with the United States.

Korea’s trade minister, Cheong In-kyo, left for Washington on Tuesday to initiate talks with the Trump administration, adding that he will “for sure negotiate on steel and automobiles, two of Korea’s key export items.”