The United States and Korea on the 14th released the final "joint fact sheet," the end product of their tariff talks and security consultations. It marks the conclusion of protracted negotiations that began after U.S. President Donald Trump took office in Jan. and the United States imposed a 25% tariff on steel and aluminum imports as well as automobiles and auto parts.
During the process, President Lee Jae-myung and President Trump held two summit meetings, and the presidential office and Ministers from related ministries including the Ministry of Economy and Finance and the Ministry of Trade, Industry and Energy continued tug-of-war negotiations by meeting their U.S. counterparts several times. Even after the two leaders on Oct. 29 announced agreement on the tariff talks, last-minute negotiations continued over security issues such as uranium enrichment.
◇ $350 billion in U.S.-bound investment specified… tariffs on cars and pharmaceuticals capped at 15%
The fact sheet reaffirms the contents of the "Korea strategic trade and investment agreement" that President Lee and President Trump released in Jul. The fact sheet said, "We welcome Korea's investment to advance economic and national security interests across a range of fields, including but not limited to shipbuilding, energy, semiconductors, pharmaceuticals, critical minerals, and AI/Quantum Computing."
Korea's U.S.-bound investment includes $150 billion (about 218.85 trillion won) in the shipbuilding sector and an additional $200 billion investment by Korea under a memorandum of understanding (MOU) on strategic investment to be signed by the two leaders.
In return, the United States agreed to apply, to Korean-made goods, the applicable rate among the Korea-U.S. FTA or the U.S. most-favored-nation (MFN) tariff rate, or 15%, whichever is higher. Specifically, a 15% tariff will apply to Korean automobiles and parts, logs, lumber and wood products, and tariffs on pharmaceuticals will not exceed 15%. For semiconductors and semiconductor equipment, it specifies that "the aim is to provide terms no less favorable than those to be provided in a future agreement."
It also abolishes additional tariffs on generic pharmaceuticals, active ingredients, and chemical precursors, as well as certain natural resources not produced in the United States, and removes tariffs imposed on certain Korean aircraft and parts.
A cap of $20 billion (about 29.18 trillion won) per year in funding, requested by the Korean government to stabilize the foreign exchange market, was also specified in the fact sheet. The fact sheet said, "The two countries reached a mutual understanding that commitments under the MOU should not cause market instability," and added, "The two countries agree that Korea will not be asked to raise more than $20 billion in any given year."
The fact sheet also includes language that "the potential market impact will be minimized by securing funds through methods other than purchases of U.S. dollars in the market." It also states that if market instability is anticipated, the Korean government may adjust the amount and timing of funding.
◇ Korean Air to buy 103 Boeing aircraft… discussing non-tariff barriers on cars and farm products
The fact sheet also welcomed the $150 billion in direct U.S. investment by Korean corporations announced in Aug. At the time, Korean Air announced the purchase of 103 Boeing aircraft equipped with GE Aerospace engines. The $36 billion (about 52.524 trillion won) deal includes Boeing 737 MAX jets, 787 Dreamliners, and 777X passenger and cargo planes.
The "Buy America in Seoul" initiative, pursued jointly by Korea and the United States, was also included in the fact sheet. Under this initiative, Korea, in cooperation with U.S. State Governments, will host an annual exhibition featuring U.S. corporations including small and midsize businesses, to promote U.S. exports to Korea.
It also includes steps to reduce non-tariff barriers that hinder exports of U.S. goods to Korea. The fact sheet said, "We will codify commitments and implementation plans to promote mutual trade and adopt them within this year at the Korea-U.S. FTA Joint Committee."
Specifically, Korea will abolish the cap of 50,000 units related to the measure allowing imports, without additional modifications, of up to 50,000 U.S.-origin vehicles per year that comply with the U.S. Federal Motor Vehicle Safety Standards (FMVSS). In emissions certification, Korea will not require submission of documents beyond those submitted to the U.S. certifying authority.
The two countries will also discuss non-tariff barriers affecting trade in food and agricultural products. They will streamline regulatory approval procedures for agricultural biotechnology products, resolve delays in U.S. applications, and establish a U.S. desk dedicated to requests related to U.S.-grown horticultural products. It also includes maintaining market access for U.S. meat and cheese using specific names.
The fact sheet also includes a pledge that "Korea and the United States will ensure that U.S. corporations are not discriminated against or faced with unnecessary barriers in laws and policies related to digital services, including network usage fees and online platform regulations." It also calls for facilitating cross-border transfer of information, including location, reinsurance, and personal data. Recognition of attorney-client privilege, responses to forced labor, protection of intellectual property rights, and implementation of the WTO Agreement on Fisheries Subsidies are also included in the fact sheet.
◇ Modernization of the U.S.-Korea alliance specified… pledge of $33 billion in support for U.S. Forces Korea
The fact sheet also addressed modernization of the U.S.-Korea alliance. The United States emphasized its defense commitment to Korea through the continued stationing of U.S. Forces Korea, and President Lee shared Korea's plan to increase defense expenditure to 3.5% of GDP in line with Korea's legal requirements. Korea will also spend $25 billion on purchases of U.S. military equipment by 2030 and provide comprehensive support of $33 billion (about 48.147 trillion won) for U.S. Forces Korea.
It also included content regarding the transfer of wartime operational control. They will promote the acquisition of U.S. advanced weapon systems and expand bilateral defense industry cooperation, including advanced weapon systems.
The leaders of Korea and the United States also reaffirmed their commitment to the complete denuclearization of North Korea and to peace and stability on the Korean Peninsula. They said they will work closely together on North Korea policy and urged North Korea to return to meaningful dialogue and to comply with international obligations, including abandoning its weapons of mass destruction (WMD) and ballistic missile programs. They also emphasized the importance of maintaining peace and stability in the Taiwan Strait and encouraged a peaceful resolution of cross-strait issues.
The two countries also reached agreement on Korea's construction of nuclear-powered submarines, civilian uranium enrichment, and reprocessing of spent nuclear fuel. The fact sheet said, "The United States supports procedures that would result in civilian uranium enrichment and reprocessing of spent nuclear fuel for Korea's peaceful use," and added, "To advance the requirements of the shipbuilding project (construction of nuclear-powered submarines), including fuel procurement options, the United States will work closely with Korea."
It also includes forming a working-level consultative body in the shipbuilding sector and helping modernize the U.S. shipbuilding industry. To that end, construction in Korea will proceed for U.S. commercial vessels and U.S. military combat ships capable of combat operations.