Trump and Japan Forge Rare-Earths Pact, Celebrating Strong Bilateral Relations
As President Donald Trump visits Asia, significant developments in trade relations between the U.S. and its key allies, Japan and South Korea, are unfolding. Trump’s engagements have spotlighted the ongoing negotiations and challenges facing their economies amid a tense trade environment.
Trump’s Diplomatic Visit to Asia
During his Asia tour, Trump focuses on enhancing bilateral relations with Japan and South Korea. Businesses in both nations are keenly observing the potential outcomes of these discussions.
Tariff Rates and Economic Impacts
Both Japan and South Korea recently negotiated tariff rates of 15%. This increase from nearly zero tariffs has dampened economic growth in both countries. In response to the tariff adjustments, substantial investment pledges have emerged. Japan committed $550 billion, while South Korea pledged $350 billion to help secure these tariff reductions.
Critics suggest that these investment commitments resemble U.S. extortion, especially since details on implementation remain ambiguous.
Japan’s Economic Performance
- Japanese exports to the U.S. have declined for six consecutive months as of September.
- Despite this, Japan’s economy defied predictions with a 1.2% annualized GDP growth in the second quarter.
- Large Japanese companies are responding to U.S. market pressures by lowering prices, impacting earnings.
According to Goldman Sachs, these trends are a worry for large manufacturers, as highlighted by an October Bank of Japan survey.
South Korea’s Economic Vulnerability
- Exports constitute over 40% of South Korea’s GDP.
- The Korea Development Institute predicts a sharp slowdown in exports due to Trump’s tariff policies.
- South Korea reported better-than-expected growth at 1.2%, according to Bank of Korea data.
Experts caution that South Korea’s economy remains exposed to the uncertainties created by the U.S. trade measures.
Ongoing Trade Negotiations
President Lee Jae Myung emphasizes that South Korea’s trade agreement with the U.S. is still at a standstill. The particulars of the investment deal are yet to be settled. Moreover, tensions escalated recently with an ICE raid at a Hyundai factory in Georgia, highlighting friction between Seoul and Washington.
Leif-Eric Easley, a professor at Ewha Womans University in Seoul, remarked that while Seoul acknowledges its alliance with Washington is crucial, the Trump administration’s terms may require continuous negotiations. He noted that many trade issues might not be resolved through the APEC summit, suggesting that future iterations of both economic and security agreements are likely.
