Trump's Trade Tactics Spark Backlash from Allies

Strategic Insights -

In the span of 24 hours last week, President Trump rattled both South Korea and Japan, two longtime allies that less than two months earlier had agreed to invest nearly $1 trillion in the United States in exchange for lower tariffs. Officials and business leaders in both countries are now questioning their governments' commitments to invest hundreds of billions in American manufacturing. The United States has already imposed tariffs on South Korean goods, with the lowered tariff to 15 percent from 25 percent in exchange for South Korean companies investing $350 billion in the US, including $150 billion dedicated to strengthening America's shipbuilding sector.

Key Takeaways:

  • South Korea and Japan have invested nearly $1 trillion in the US in exchange for lower tariffs, but now feel their governments were strong-armed into the deal.
  • Hundreds of South Korean citizens were arrested and detained for living or working in the US illegally at a major Hyundai-LG construction site in Georgia.
  • President Trump has pledged to make it "quickly and legally possible" for foreign companies investing in the US to send their people to build products in the country, but added that they need to hire and train American workers.
  • Japan agreed to invest $550 billion in the US, but within a 45-day timeframe, the US can impose higher tariffs if Japan fails to review and fund the investment.
  • South Korea's president, Lee Jae Myung, said that his country's businesses are "flummoxed" by the raid because they were not there as long-term or permanent workers, but as technicians who helped install facilities and equipment.
  • The US has not helped such people work safely in the country, leading South Korean businesses to hesitate to make direct investments.
  • Japan's foreign minister, Taro Kono, announced that Tokyo will not proceed with plans to invest in US shipbuilding unless an agreement is reached on how the rest of their investment in the US will be put in place.

Statistics:

  • $1 trillion: combined investment from South Korea and Japan in the US in exchange for lower tariffs
  • $350 billion: investment commitment from South Korean companies in the US, including $150 billion for strengthening America's shipbuilding sector
  • 15 percent: lowered tariff on South Korean goods in exchange for investment commitment
  • $550 billion: investment commitment from Japan in the US
  • 45 days: timeframe for Japan to review and fund the investment
  • 10 percent: share of cash flow that Japan would initially receive from the investment

Sources:

  • "The New York Times," "The Washington Post"
  • Chosun Ilbo (Seoul's conservative daily newspaper)
  • The Korean government, The White House
  • Choe Sang-Hun and Jin Yu Young (reporters)