Trump Gains One by One Using Tariffs as a Weapon... "South Korea's Import Expansion and Defense Cost Increase Inevitable"

U.S. President Donald Trump used tariffs as leverage to secure promises from Mexico and Canada to strengthen measures against fentanyl and illegal immigration. Trade experts expressed concern, saying, "President Trump's strategy of obtaining concessions one by one through tariff threats is working," and that South Korea is also in a situation where it has no choice but to partially accept U.S. demands such as expanding imports and increasing the defense cost-sharing burden for U.S. forces stationed in Korea.

On the 4th, Professor Kang In-su of Sookmyung Women's University said in a phone interview with Asia Economy, "This case has shown the world that Trump's tariffs are not just a bluff but a real threat," adding, "Since illegal immigration and drug problems cannot be resolved within a month in reality, this is a matter of observing how well Canada and Mexico follow Trump's words."

On the 3rd (local time), one day before the implementation of a 25% tariff on Canada, President Trump abruptly decided to postpone it for a month. This was in response to Canada and Mexico's promises to strengthen border controls to block fentanyl and illegal immigration.

Kim Hyuk-jung, a senior researcher of the North America and Europe team at the Korea Institute for International Economic Policy, said, "During Trump's first term, he also planned to impose tariffs on Mexico but withdrew them after Mexico deployed soldiers nationwide to crack down on illegal immigration," adding, "However, this time, instead of immediately withdrawing, the postponement seems to be a strategy to extract more concessions from these countries."

South Korea cannot be complacent either. Since President Trump has labeled South Korea as a 'money machine,' i.e., a wealthy country, there is a high possibility that a Trump-originated bill will be presented soon. South Korea's total exports to the U.S. last year amounted to $127.8 billion, up 10.4% from the previous year, and imports were $72.1 billion, up 1.2%. As exports increased more than imports, the trade surplus reached a record high of $55.7 billion. From the U.S. perspective, this means a trade deficit of over $55 billion with South Korea.

To balance the trade deficit with the U.S., South Korea is considering increasing imports of U.S. energy products such as crude oil and liquefied natural gas (LNG). Kim said, "In 2017, the share of U.S.-origin crude oil and LNG in South Korea's imports was only 1%, but during Trump's first term in 2018, this rose to 7.7%, and last year it increased to 14.4%. Expanding this to around 30% would reduce the trade surplus with the U.S. by about $20 billion."

First, Korea Gas Corporation and some public power companies are reviewing the expansion of U.S. LNG imports. An energy industry official said, "For LNG, the ratio of long-term contracts to short-term and spot contracts is about 8 to 2, but spot contracts carry high uncertainty. To increase U.S. LNG imports, long-term contracts need to be pursued," adding, "The 11th Basic Plan for Electricity Supply and Demand (BPE) must be finalized to establish a natural gas supply plan that forms the basis for LNG import volumes."

South Korea must also respond to demands for increased investment in the U.S. and higher defense cost-sharing payments, in addition to addressing trade imbalance issues. Professor Kang said, "Looking at South Korea's trade surplus with the U.S., a significant factor is that South Korea invests in semiconductors, secondary batteries, and automobiles in the U.S., while importing intermediate goods such as parts and materials from Korea for product manufacturing," advising, "Since investment and exports are intertwined from South Korea's perspective, efforts should focus on persuading the U.S. based on this."

Professor Kang viewed an increase in defense costs as inevitable. He said, "While a tenfold increase mentioned by President Trump is difficult, some level of acceptance is unavoidable," adding, "Negotiation cards could include reducing defense costs by excluding the core forces of the U.S. Forces Korea and scaling down the overall amount."

This content was produced with the assistance of AI translation services.