Failed to Defend Tariffs and Only Got Homework...Government Negotiation Skills Under Scrutiny

On the 2nd (local time), U.S. President Donald Trump abruptly announced a 25% reciprocal tariff on Korean imports, triggering an emergency in the Korean industrial sector. Despite sending high-ranking officials from deputy minister to minister level to Washington four times for negotiations, the Korean government has been heavily criticized for ending up with 'empty-handed diplomacy.'

On the 3rd, the industry focused on the fact that Korea was subjected to a 25% tariff rate, which is 1 percentage point higher than Japan's. An industry official said, "This is a clear example showing how much our government was pushed back in negotiations with the U.S.," adding, "The higher-than-expected reciprocal tariffs have left the entire industry bewildered."

The implementation of these reciprocal tariffs is expected to cause tangible damage, especially in industries with a high export ratio to the U.S. The automobile industry is particularly concerned. Last year, Korea's automobile exports to the U.S. amounted to $34.7 billion, accounting for about half of total exports. The industry points out, "Even if the conditions for IRA (Inflation Reduction Act) subsidies are met, the tariff burden will inevitably reduce price competitiveness." Since high tariffs directly affect vehicle costs, mid- to long-term strategic adjustments such as export model modifications or expansion of local production are unavoidable.

The problem does not end there. Recently, the U.S. has demanded that the Korean government participate in the Alaska LNG project, whose profitability is uncertain. The Trump administration emphasizes this as cooperation within the framework of an 'energy alliance,' but in reality, it is a structure where Korea is expected to purchase and import U.S.-produced energy. Some countries, including Taiwan, have already decided to participate in equity shares under U.S. pressure. Korea is also considering participation in practice under the pretext of 'alliance management' and 'trade conflict mitigation.' However, the private energy sector criticizes, "There are concerns that the government might bear the burden of a large-scale investment with unverified business feasibility using taxpayers' money."

In summary, despite sending high-ranking officials to the U.S. four times?twice the Minister of Trade, Industry and Energy, once the Chief Negotiator for Trade, and once the Deputy Minister for Trade?the government ultimately returned only with the burdens of the 'tariff bomb' and the Alaska project.

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Even on the day the U.S. announced the reciprocal tariff measures, the government has been unable to present any concrete countermeasures and has only continued holding meetings. The possibility of tariff imposition had been forecasted months in advance, and the industry repeatedly requested preemptive responses, but the government has only repeated 'meetings' without clear measures.

An official from the Ministry of Trade, Industry and Energy stated, "We are urgently reviewing detailed items and response plans," but it is difficult to avoid criticism that the government is only repeating post-facto responses after the tariffs have already taken effect. An industry insider emphasized, "Even now, it is necessary to establish a practical trade response by building a strategic cooperation network with the U.S. Congress, companies, and law firms."

While the government shows repeated helplessness in trade negotiations, companies are throwing themselves into survival efforts. Hyundai Motor decided to invest a total of 31 trillion won in an electric vehicle plant and a battery cell joint venture in Georgia, and Hanjin Group secured a stable revenue source in the U.S. through an aircraft engine maintenance contract with GE. LG Energy Solution, Samsung SDI, and others are also establishing local battery plants one after another, directly breaking through protectionist trade barriers in the U.S. In fact, the structure where corporate capital fills the diplomatic void of the government is being repeated.

Within the industry, there is a self-deprecating evaluation that "the government neither prevented tariffs nor refused the energy projects desired by the U.S., leaving only burdens on companies." An anonymous company official said, "Now, there are even remarks like 'Do we have to do diplomacy ourselves?'" adding, "With the current lukewarm response under the Trump administration's second term, we absolutely cannot endure."

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