Korea Pitches Trump on Shipyards for Last-Minute Trade Deal

Workers next to an A.P. Moller-Maersk AS container ship, powered by green methanol, under construction in the dry dock at the HD Hyundai Heavy Industries Co. shipyard in Ulsan, South Korea, on Thursday, Jan. 25, 2024. Photographer: SeongJoon Cho/Bloomberg Photo by SeongJoon Cho /Bloomberg

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(Bloomberg) — South Korea is pitching the US on a shipbuilding partnership as a key proposal to seal a last-minute agreement to avoid a 25% tariff rate.

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While details remain unclear, Yonhap News reported that South Korea has proposed a multi-billion dollar project dubbed “Make American Shipbuilding Great Again.” South Korea’s Industry Ministry declined to comment.

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“We confirmed the US side’s strong interest in the shipbuilding sector and the two countries agreed to work together to develop mutually acceptable terms that include shipbuilding cooperation,” South Korea’s presidential office said in a statement Saturday.

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As countries across Asia clinched deals last week, Seoul’s negotiators have been racing to stay engaged with their US counterparts as Washington shifted its focus to the European Union and China. The US and EU announced a pact Sunday that will see the bloc face 15% tariffs on most of its exports to the US, including automobiles. The latest agreement which follows a Japan deal last week, adds to the pressure on Asia’s fourth-largest economy to clinch a deal. 

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South Korea, where negotiations have been slowed by internal political turmoil, is one of the biggest Asian economies to still be without a deal. Aside from China, other major exporters in the region that are in the thick of negotiations include India and Taiwan.

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South Korea’s finance and foreign ministers are set to meet with their US counterparts this week in a last-minute bid to close the negotiations and the government in Seoul has said the two countries are committed to making a deal before US President Donald Trump’s August 1 deadline.

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Also on table is increased access to South Korea’s agricultural market, as well as a fund to invest in American projects similar to an agreement Japan struck. Under the deal, the two sides touted a $550 billion fund as part of the agreement on the tariff rate dropping to 15%. The South Korean talks are similarly focused on reaching a 15% tariff rate, including for autos, and the recent proposals suggest a comparable structure. 

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Putting agricultural imports on the table raises the stakes for South Korea’s new government. Past efforts to open the country’s beef market sparked nationwide protests and any shift on rice imports could face even stiffer resistance. 

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Barring a deal, Bloomberg Economics estimates a 1.7% hit to South Korea’s gross domestic product, with market volatility and uncertainty threatening to push the GDP losses beyond that. Overseas shipments were equivalent to more than 40% of South Korea’s GDP last year.  

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“Japan’s trade deal paints a positive backdrop but also sets a high bar for others,” Morgan Stanley economist Kathleen Oh said in a note last week. “Korea and Taiwan may need to ramp up new investment schemes to increase agricultural and energy imports and expand market access, as seen in Japan’s case.”

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