Donald Trump arrives in South Korea on Wednesday for the final leg of an Asian tour that has seen him agree deals on trade and minerals with a succession of states in the region.
But his demand for an upfront investment of $350 billion (€300 billion) in the United States in return for a reduction in tariffs on South Korea goods is proving too much for president Lee Jae-myung.
Trump and Lee will meet on Wednesday ahead of an Asian Pacific Economic Cooperation (APEC) summit in the southeastern coastal city of Gyeongju. But South Korean officials said the meeting is unlikely to produce an agreement that would see Trump cut the tariff on the country from 25 per cent to 15 per cent, as he did for Japan.
Lee has agreed in principle to investments in the US worth $350 billion, the equivalent of 6.5 per cent of South Korea’s Gross Domestic Product (GDP).
Lee’s government wants most of it to take the form of loans to Korean companies to expand their operations in the US. But Trump wants the total paid upfront in cash or equity in the companies.
“The method of investment, the amount of investment, the timeline and how we will share the losses and divide the dividends — all of these remain sticking points,” Lee said in an interview with Bloomberg on Monday.
“The US will of course try to maximise its interests but it mustn’t be to the extent that causes catastrophic consequences for South Korea.”
The delay puts South Korean car manufacturers at a disadvantage compared to their counterparts in Japan, which agreed a deal last month to invest $550 billion in the US in return for a reduced tariff of 15 per cent. But economists have warned that agreeing to Trump’s terms could destabilise the South Korean economy.
Koreans were shocked in September by a US immigration raid on a Hyundai plant in Georgia that saw more than 300 workers arrested for alleged visa violations, put in chains and deported. Seoul and Washington have been working on a deal to ensure that Korean companies in the US can bring in the workers they need.
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“This has also caused severe trauma for the workers as well and I have heard that some workers do not want to go back,” Lee said.
“Without taking measures to ensure the safety and rational treatment of these workers, there is a high possibility that factory construction in the US may be significantly postponed.”
Trump is due to meet Chinese premier Xi Jinping on Thursday at the Apec summit.
He has also floated the idea of meeting North Korean leader Kim Jong-un during his visit, although there has been no sign from Pyongyang that such a meeting will take place. Trump met Kim three times during his first term as president and he said ahead of this week’s visit that he would like to meet him again.
“I put it out over the internet that I’m coming to South Korea and if he would like to meet, I’m open to it,” he said.