US and South Korea race to seal trade deal by August 1

South Korean Industry Minister Kim Jung-kwan and US Commerce Secretary Howard Lutnick discussed sectoral and mirror tariffs on Thursday.

During the conversation, Kim stressed the need to reduce trade barriers. The two sides agreed to strengthen cooperation in manufacturing and continue talks, the Korean Ministry of Trade, Industry and Energy said in a statement.

The ministerial meeting followed the United States' postponement of a so-called 2+2 format, originally scheduled for Friday, July 25, and intended to bring together top finance and trade officials from both countries, including US Treasury Secretary Scott Bessent.

A US Treasury spokesperson said the postponement of the meeting with Bessent was due to a scheduling conflict.

Efforts and concessions

As noted in Bloomberg, South Korea saw the meeting as a key opportunity to advance trade talks and prevent the increase in tariffs to 25%, which President Donald Trump threatened.

In recent weeks, Seoul has weighed politically sensitive concessions in areas such as agriculture, energy, and defense. This is necessary to protect its economy, which is largely dependent on exports.

In addition, on Wednesday, Kim held a separate meeting with US Energy Secretary Chris Wright, during which the parties discussed cooperation in the field of clean energy and energy security.

South Korean Trade Minister Yeo Han-koo also plans to meet with US Trade Representative Jamieson Greer.

As part of the broader talks, the countries are also considering the creation of a joint investment fund that would direct South Korean capital into projects implemented in the United States.

According to sources familiar with the negotiations, Seoul is preparing to offer at least $100 billion in investment commitments, which should be secured through consultations with leading South Korean conglomerates.

At the same time, as Bloomberg notes, failure in the negotiations could put South Korean exporters at a disadvantage and be a serious blow, since in 2024 foreign deliveries accounted for more than 40% of the country's GDP.

Trump's tariffs

On April 2, US President Donald Trump imposed tariffs on most US trading partners. Tariff rates ranged from 10% to 50%.

However, the head of the White House later suspended these tariffs until July 9 and set a single rate of 10% for all countries. During this period, the US expected to conclude individual trade agreements with partner countries.

In early July, Trump announced the introduction of 25% tariffs on goods from Japan and South Korea starting August 1.

Seoul had previously called on Washington to sign a mutually beneficial trade deal with the US to avoid high tariffs on exports.