US and South Korea seal trade deal

South Korea has agreed to invest $350bn in the US in return for lower tariffs on car exports to the world’s largest economy, in a trade deal struck by President Donald Trump and his South Korean counterpart Lee Jae Myung.

Wednesday’s agreement will reduce US auto tariffs on South Korean imports from 25 to 15 per cent, providing relief for the Asian country’s industry, which had been subject to higher duties than its Japanese rivals. Vehicles accounted for about a third of South Korean exports to the US last year, according to UN trade data.

“We reached a deal,” Trump, who is in South Korea for a summit of the Asia-Pacific Economic Cooperation forum, said after a meeting with Lee. “We did a lot of different things. Great session.”

The deal concludes months of wrangling after a framework agreement was reached in July. Seoul had balked at Washington’s demands for upfront cash investments, holding out on signing a deal even after Tokyo inked an agreement with the Trump administration in September.

Kim Yong-beom, Lee’s policy chief, said that as part of the deal, South Korea had agreed to invest $200bn in the US in cash, with annual investments capped at $20bn and profits split between the two countries until the initial investment is recouped.

The remaining $150bn would be accounted for by a shipbuilding partnership between the countries, Kim said.

US commerce secretary Howard Lutnick would head a committee to assess the South Korean investment projects, he said, adding the deal would still have to be ratified by South Korea’s national assembly, which is controlled by Lee’s leftwing Democratic party.

Senior South Korean officials previously argued that their country was not in a position to replicate Japan’s deal due to its smaller foreign currency reserves and lack of a currency swap agreement with the US.

Speaking to legislators on Wednesday evening, the governor of South Korea’s central bank, Rhee Chang-yong, said annual investments of $15bn-$20bn in the US would have a neutral impact on the value of the won.

The US reduction in tariffs will put the South Korean auto industry on a more equal footing with its Japanese competitors, whose exports face a duty of 15 per cent under Tokyo’s trade agreement with Washington.

The US also agreed to ensure that any semiconductor tariffs would not disadvantage South Korean chip exports relative to exports from Taiwan, Kim said.