[New York Diary] Korea-U.S. Tariff Talks Entangled by 'All-In on Lutnick' Strategy

"The government is focusing excessively on Howard Lutnick, the U.S. Secretary of Commerce."

This is what a former Korean trade official told a reporter in July, at the height of the Korea-U.S. tariff negotiations. He expressed concern that Secretary Lutnick, whom the previous administration had kept at a strategic distance, had rapidly emerged as the key counterpart in negotiations right after the new government took office. Negotiating with the Donald Trump administration, which prioritizes protectionism, was already a complex challenge. The official predicted that the talks could become even more difficult due to Secretary Lutnick's aggressive, hardline negotiating style, which relies on power dynamics to pressure the other side.

원본보기 아이콘

These concerns have become reality. Contrary to the joint announcement of a Korea-U.S. trade agreement at the end of July, negotiations are now deadlocked. The biggest sticking point is the implementation method for the $350 billion investment in the United States. Secretary Lutnick is the one who extracted Korea's investment pledge to avoid "tariff bombs," and he is also the one persistently demanding an increase in cash investments despite the Korean government's insistence that it is not feasible.

Ironically, it was Korea and Japan who put Secretary Lutnick at the forefront of the tariff negotiations. U.S. trade talks are led by Secretary of the Treasury Scott Besant and Secretary Lutnick. While Secretary Lutnick is known as a hardliner on trade policy, he was initially overshadowed by Secretary Besant, who, though also from Wall Street, is considered more rational and flexible. Lutnick's influence grew after he successfully concluded consecutive trade deals with Japan and Korea. Japan pledged a $550 billion investment in exchange for tariff reductions, and Korea, treating this as a "model answer," pursued a similar agreement, further boosting Lutnick's influence.

The current deadlock stems from the United States' excessive demands, which, under the pretext of correcting trade imbalances, are cornering even its allies. However, the Korean government's response raises questions about its strategic judgment. By relying too heavily on negotiations with the hawkish Secretary Lutnick, the government found itself facing overwhelming pressure. Lutnick summoned the Korean minister to Washington, D.C., New York, and Scotland in succession, conducting negotiations in a high-handed manner. He also openly used the competitive dynamic between Korea and Japan, whose trade structures are similar, as a bargaining chip. In the end, focusing negotiations on someone "even more Trump-like than Trump" itself became a risk.

The government's assessment of the situation was also problematic. From the moment the deal was announced, there were clear differences in perspective between Korea and the United States regarding investment and agricultural market opening. President Trump, after the agreement, firmly stated that "the United States will own and control the investment, and the investment destinations will also be decided by the United States." This is a stark contrast to the guarantee and loan-based investment method the Korean government had advocated. Unless President Trump was lying, it is highly likely that the Korean government downplayed the issue for domestic political reasons. There was no formal agreement document, either. This gap quickly backfired, as the U.S. memorandum of understanding (MOU) turned out to be significantly different from Korea's internal memorandum.

A $350 billion cash investment is virtually impossible. President Lee Jaemyung's remarks about "grounds for impeachment" and the possibility of a "foreign exchange crisis" may not be exaggerated. However, Korea cannot simply walk away from the talks and accept a 25% tariff on automobiles, followed by extremely high tariffs on semiconductors, pharmaceuticals, and other goods. Ultimately, the government, which mistakenly believed that a "dreaming different dreams" agreement with the United States was a successful negotiation, must now untangle this knot.

For a country whose livelihood depends on trade, tariff negotiations with the world's largest market, the United States, are a matter of survival. The government must now completely reassess its negotiation strategy with the United States. It is necessary to move away from an all-in strategy on Secretary Lutnick, diversify the negotiation landscape, and even put cards previously set as "red lines," such as opening the beef and rice markets, on the table to expand the negotiating space. It is easy to blame the United States for negotiation failures, but there is little practical benefit to be gained by stirring up anti-American sentiment. The U.S. economy remains robust, and President Trump shows no sign of backing down from his tariff policies. Finding a breakthrough in this difficult situation-that is the essence of diplomacy and the true test of the government's competence.

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