Seoul: Following his inauguration, U.S. President Donald Trump ordered a review of his country's existing trade deals, prompting speculation about a potential revision of the Korea-U.S. Free Trade Agreement (KORUS FTA).
According to Yonhap News Agency, Trump signed a trade memorandum instructing federal agencies to identify unfair trade practices and review all trade agreements, including the U.S.-Mexico-Canada Agreement (USMCA), for possible improvements. He also directed an investigation into the causes of America's trade deficits with foreign nations. Although South Korea was not explicitly mentioned in the memorandum, experts noted that the KORUS FTA could still be subject to review.
"Trump's hard-line trade policies had been anticipated, as they mirror those implemented during his first administration," said Yeo Han-koo, a senior researcher at the Peterson Institute for International Economics. "When starting his first term, Trump reviewed existing free trade agreements, identified sources of trade deficits and examined unfair trade practices before devising detailed trade policies," Yeo explained. "Similarly, today's announcements were broad and covered all free trade agreements."
Others noted the second Trump administration may be different from his first, partly due to the large number of issues he has to deal with. "Trump has many other issues to deal with, such as the Panama Canal and inflation," Song Yeong-kwan, a senior researcher at the Korea Development Institute, said. "And he has only four years. No reelection. That would limit Trump's extremist policies."
Yeo, a former trade minister, agreed that Seoul may have bought some time to prepare for possible changes to its trade relations with the United States, as the new Trump administration is expected to focus on issues with China, Canada and Mexico for the time being. Shortly after his inauguration on Monday (U.S. time), Trump said he plans to impose tariffs of up to 25 percent on imports from Mexico and Canada from the start of next month.
"South Korea is not the primary target. Trump did not directly mention the KORUS FTA," Yeo said. "Given the complexity and scale of these issues, South Korea can adopt a wait-and-see approach while monitoring developments and preparing appropriate measures."
Still, possible changes to the USMCA are keeping many South Korean firms on their toes. Many South Korean conglomerates, including Samsung Electronics Co., LG Electronics Inc. and Kia Corp., currently operate facilities in Mexico that serve as their production bases for their entire North America operations under the USMCA. "The tariff-related uncertainty poses a major risk to domestic companies," an industry insider said. "And they should closely monitor U.S. policy trends and prepare for various possibilities."
The USMCA was signed by the first Trump government in 2018 and took effect in 2020, replacing the 1994 North American Free Trade Agreement (NAFTA). During Trump's first administration, South Korea was among the initial targets of trade policy changes, alongside NAFTA and China. South Korea, too, agreed to revise the KORUS FTA in 2017 after months of renegotiation at the first Trump administration's request.
In his inauguration speech, Trump said the U.S. will "tariff and tax foreign countries to enrich our citizens." Seoul has announced plans to increase its imports from the U.S. in a preemptive attempt to reduce its trade surplus and avoid facing the wrath of the second Trump administration putting "America First" in all areas, including trade with an allied nation.