Raging Trump Storm... "Must Overcome Tariff Tempest with Energy Big Deal"

As the Trump administration fully implements reciprocal tariffs, there is growing support for using an 'energy big deal'?increasing fossil fuel imports from the United States?as a bargaining chip in negotiations.

Although the U.S. raises concerns about non-tariff barriers in various countries, the best way to minimize tariffs is to significantly increase imports of American products to reduce the trade deficit. Coincidentally, on the 8th (local time), President Donald Trump issued an executive order to revitalize the domestic coal industry.

Donald Trump, President of the United States, announced on the 2nd (local time) the policy of imposing reciprocal tariffs on various countries. Photo by Reuters Yonhap News

원본보기 아이콘

Yang Ju-young, head of the Economic Security and Trade Strategy Research Division at the Korea Institute for Industrial Economics and Trade, said on the 9th, "The real grievance of the U.S. is the trade deficit," adding, "At this point, energy is the only sector where our companies can increase U.S. exports without incurring losses." He proposed consolidating energy purchases, which are currently dispersed among different countries, into a 'big deal.'

The Trump administration, shortly after taking office, declared a 'national energy emergency' and pushed for increased fossil fuel production. The plan is to expand production and exports of oil, coal, and liquefied natural gas (LNG). The abrupt withdrawal from the Paris Climate Agreement was also for this reason. As of last year, the U.S. ranked 7th among South Korea's coal import sources and 5th for LNG imports, so the energy trade share is still relatively small. In a situation where supply chain diversification is necessary, expanding imports of U.S.-made energy is seen as a mutually beneficial alternative.

원본보기 아이콘

In particular, the 'Alaska LNG Project' promoted by the U.S. could serve as an important leverage point in negotiations. Last month, Alaska Governor Mike Dunleavy visited South Korea and held a series of meetings with key energy company representatives from SK, POSCO, Hanwha, and others. Representatives from Glenfarne Group, a project partner, and the Alaska Gasline Development Corporation also visited Korea together. Analysts suggest that this can be used as a card to secure practical benefits at a level manageable for South Korea, as much as the U.S. desires energy development.

Yeohangoo, senior fellow at the Peterson Institute for International Economics (PIIE), recently stated at a seminar, "This project has low economic feasibility for individual countries or companies to pursue alone," but added, "If risks are shared with countries considering participation, such as Japan and Taiwan, it could become an effective card in negotiations with the U.S."

Jung In-gyo, head of the Trade Negotiation Headquarters at the Ministry of Trade, Industry and Energy, who visited the U.S. on the 8th and 9th, also announced plans to discuss Alaska LNG development and shipbuilding cooperation during reciprocal tariff negotiations with the U.S. Upon arrival in Washington D.C., Jung said, "Alaska LNG and shipbuilding are areas of interest for the U.S. side."

원본보기 아이콘

However, there are also calls to secure negotiation room by adjusting some systems pointed out as non-tariff barriers, in addition to expanding energy imports. The Ministry of Trade, Industry and Energy is conducting an internal review to identify any trade restriction measures that can be lifted to initiate negotiations. Jung In-gyo is expected to discuss non-tariff barrier issues when meeting with Jamie Gorelick, U.S. Trade Representative (USTR).

Earlier, the U.S. Trade Representative pointed out in a country-specific trade evaluation report released just before the reciprocal tariff announcement that South Korea's imposition of network usage fees and restrictions on in-app payments adversely affect U.S. big tech companies.

A representative example is the restriction on the overseas transfer of location-based data. Google wants to export high-precision maps containing sensitive facility information such as military bases, but the government is blocking this. The U.S. criticizes this as 'anti-competitive.' On the other hand, there is a view that Google avoids corporate tax burdens by not having data centers domestically.

원본보기 아이콘

A government official said, "We are reviewing whether there are adjustable measures, but we cannot blindly abolish systems established in accordance with international trade regulations." The stance is that unilateral or preemptive withdrawal is difficult.

Professor Heo Yoon of Sogang University's Graduate School of International Studies emphasized the need to seek ways to partially meet U.S. demands without undermining the foundation of Korean industry. Professor Heo advised, "It is very risky to expose our cards before negotiations," and added, "Among the issues the U.S. claims as non-tariff barriers, we should find areas that align with the direction of advancing our economy."

© The Asia Business Daily(www.asiae.co.kr). All rights reserved.