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Donald Trump heads to South Korea on Wednesday to meet President Lee Jae Myung, with deadlocked talks over a $350bn trade deal between the two countries threatening to cast a shadow over the event.
After arriving on a flight from Tokyo, where he signed a rare earths deal with Japan’s new prime minister, Sanae Takaichi, the US president is due to address a summit of CEOs and meet Lee in the town of Gyeongju, a historical city playing host to the annual Apec summit.
At the top of the agenda will be the unresolved trade agreement between the US and South Korea. The two allies announced a deal in August under which Seoul would avoid the worst of the tariffs by agreeing to pump $350bn of new investments into the US.
However, Korean officials say a direct cash injection could destabilise their economy, and they would rather do loans and loan guarantees instead. Officials from both sides have said Trump and Lee are unlikely to finalise an agreement.
For now, South Korea is stuck with a 25% tariff on vehicles, putting manufacturers such as Hyundai and Kia at a disadvantage against Japanese and European competitors, which face a 15% levy.
Trump has also pressed allies including South Korea to pay more for defence, and the two are likely to discuss efforts to engage North Korea, which announced early on Wednesday that it had test-fired a nuclear-capable cruise missile the previous day.
Trump has made repeated calls for a meeting with leader Kim Jong-un, including during this trip, but there has been no public comment from Pyongyang.
In turn, South Korea has sought reforms to US immigration laws to allow for more workers to build factories after a raid on a Hyundai Motor battery plant in Georgia.
Lee took office in June and had a warm meeting with Trump at the White House in August, but tensions emerged over the US immigration raid in September. More than 300 South Koreans were detained, sparking outrage and a sense of betrayal.
Lee has said companies were likely hesitate to make future investments in the US unless the visa system was improved. “If that’s not possible, then establishing a local factory in the United States will either come with severe disadvantages or become very difficult for our companies,” he said. “They will wonder whether they should even do it.”
The South Korean leg of Trump’s Asia tour stands in contrast to his experience in Japan, where the government has worked to fulfil its commitment of $550bn in investments as part of an earlier trade agreement. Commerce secretary Howard Lutnick announced up to $490bn in commitments during a dinner with business leaders in Tokyo.
Trump bonded with prime minister Takaichi, whose mentor, Shinzo Abe, was a “favourite” of the US president. On Tuesday, Trump took Takaichi with him as he spoke to US troops aboard an aircraft carrier and then unveiled several major energy and technology projects in America to be funded by Japan.
Trump is arriving in Gyeongju ahead of a high-stakes meeting expected with Chinese president Xi Jinping on Thursday.
Negotiators from the world’s top two economies agreed a framework on Sunday for a deal to pause steeper American tariffs and Chinese rare earths export controls, US officials said. The news sent Asian stocks soaring to record peaks.
Taiwan foreign minister Lin Chia-lung said on Tuesday he was not worried that Trump would “abandon” the island in his meeting with Xi.
Since taking office in January, Trump has vacillated on his position towards Taiwan as he seeks to strike a trade deal with Beijing. Trump says Xi has told him he will not invade Taiwan while the US president is in office, but Trump has yet to approve any new US arms sales to Taipei.
With Reuters and Associated Press
