When diplomatic pleasantries mask deeper divisions… The recent S.Korea-US summit was cordial, yet a crucial joint statement never materialized. Unresolved issues like auto tariffs, MFN status, and a massive $350 billion fund remain on the table. What does this mean for the future of their economic partnership?

The recent bilateral meeting between South Korean President Lee Jae Myung and US counterpart Donald Trump concluded in a notably cordial atmosphere, with both leaders publicly affirming their commitment to bolstering a strategic partnership rooted in economic and security alliance. Despite the amicable public display, a significant deviation from customary diplomatic practice marked the summit: the absence of a joint statement, a document typically issued unless profound disagreements linger unresolved between nations.

A primary point of contention stemmed from Washington’s steadfast refusal to formalize, in writing, key elements of a previously reached tariff agreement. Seoul had repeatedly pressed for this written commitment, particularly concerning the reciprocal 15% tariffs on South Korean exports and the reduction of duties on South Korea-made automobiles from 25% to 15%. This hesitancy from the US side created an immediate hurdle, leaving critical aspects of the trade relationship ambiguous and uncodified, impacting the broader bilateral trade dialogue.

Further complicating the trade landscape was the United States’ reluctance to formally grant South Korea Most-Favored-Nation (MFN) status. This critical designation would ensure that South Korean semiconductor and pharmaceutical products benefit from the same tariff rates applied to goods from major economic powers like Europe and Japan. While an agreement was in place to apply either a 15% reciprocal tariff or MFN rates, the two nations remained divided on whether these rates would extend to product-specific duties, highlighting a nuanced yet significant gap in their understanding of economic diplomacy.

According to analysts, Washington’s strategic withholding of written pledges on these issues is perceived as a calculated maneuver designed to secure further economic and security concessions from Seoul. This includes potential demands for increased foreign investment from South Korea in the US and larger contributions towards shared defense costs. The lack of a formal written agreement also provides the US with leverage to push for greater access to South Korea’s sensitive agricultural markets, a topic deliberately excluded from prior trade tariffs negotiations.

Conversely, South Korea has already demonstrated its willingness to compromise, making substantial concessions on lowering non-tariff barriers related to digital trade and car imports into the United States. Furthermore, the legal standing of the new US reciprocal tariffs remains uncertain, as they were imposed under the International Emergency Economic Powers Act and are currently under review by a US appeals court, potentially facing an unfavorable ruling. This contrasts sharply with product-specific tariffs, such as those on steel, which derive legal certainty from Section 232 of the Trade Expansion Act, influencing future South Korea US relations.

Another significant factor contributing to Washington’s reluctance in formalizing the trade deal is the unresolved structure of a pledged $350 billion US-dedicated fund from Seoul. While South Korea aims to structure this commitment through loans and payment guarantees under a non-binding memorandum, the US is advocating for Seoul to take an equity stake in the fund. Disagreements also emerged regarding Seoul’s intention to earmark a substantial $150 billion of this fund specifically for shipbuilding, raising concerns in Washington about potential limitations on its discretion over fund allocation, directly impacting foreign investment strategies.

Against this backdrop, Commerce Secretary Howard Lutnick recently announced US plans to establish a national economic security fund, seeking capital contributions from South Korea, Japan, and other allied nations. This broader initiative underscores a strategic pivot, with the unresolved bilateral trade issues becoming part of a larger, evolving framework of economic diplomacy. Consequently, Seoul is now proactively preparing for the prospect of protracted and continuous trade negotiations, acknowledging that persistent dialogue has become the “new normal” in their security and economic discussions.