Commentary: South Korea’s dependence on US might give it little room to navigate renewed tariff threats | USAEMALL.com

WHAT CAN SOUTH KOREA DO?

In his zero-sum way of viewing trade, Mr Trump sees trade deficits as a defeat for the US.

South Korea has run an aggregate trade surplus for decades, including with the US. As a result, the South Korean central bank is routinely under special surveillance by the US Treasury Department for potential currency manipulation.

That said, a trade surplus is regularly reported in South Korea as victory for the country so there is some room to argue, as Mr Trump usually does, that South Korea is “taking advantage” of the US. Still, most of these trade issues were litigated between the two sides in the negotiations for the US-Korean trade deal first struck in 2007, and subsequently amended in 2010 and 2018.

The real driver of the current US-South Korea trade imbalance is likely South Korea’s low fertility rate and high consumer debt – both of which weigh on consumption. However, the headline trade deficit is likely the only relevant metric to the White House.

Other US trade partners, particularly the European Union (EU), have fought off similar demands. The EU has the market power to resist and does not need US security guarantees as much as South Korea does.

South Korea, by contrast, is a small market struggling with long-term, low fertility-driven decline. With domestic demand too weak to absorb its national products, it desperately needs export markets.

It is also dependent on the US for security, given how it abuts North Korea and China. Without the US alliance, its defence costs would double or triple. Mr Trump has a bully’s sense for the weaknesses of his counterparties, and this means he might leverage South Korea’s market and security dependence to get what he wants.

Robert Kelly is a professor of political science at Pusan National University. He writes a monthly column for CNA, published every second Monday.