Washington– President Donald Trump is Going to Japan and South Korea next week to tout massive financial gains — at least $900 billion in investments in U.S. factories, a natural gas pipeline and other projects.
Japan South Korea made those financial commitments in August to try to convince Trump Planned reduction in tariff rates From 25% to 15%. But as the US president is scheduled to leave on Friday night for Asia, the pledges are more of a loose end than money in the bank for US industry.
Japan has pledged investments worth $550 billion, but it wants this money to benefit its companies, which made this a condition in a memorandum issued in September. As of Monday, Japan will have a new prime minister, Sanae Takaishiwho has expressed respect for Trump but is serving in an untested coalition government.
South Korea has offered $350 billion, but wants a US dollar swap line to facilitate its investments and seeks to finance transactions through loan guarantees. Otherwise, this commitment may sink its economy.
The investment arrangements are unusual for trade frameworks, and Trump asserts that he will personally direct how the money is spent, enabling him to pick winners and losers. The weeks-long talks did not yield any breakthroughs on how to move forward with investments, despite the two countries’ desire to maintain their relationship with America.
However, before the trip, Trump was radiating optimism that his tariffs had forced investments to fuel what he believed would be An economic boom begins next year.
“We did a good job, you know, with Japan and South Korea,” Trump told Republican senators on Tuesday. “Without tariffs, the deal would never have been made. I’ll tell you what. Tariffs equal national security.”
For Trump, the investments are also intended to demonstrate America’s strength ahead of the planned meeting with Trump Chinese leader Xi Jinping While in South Korea. US Trade Representative Jamison Greer on Monday described Trump’s strategy in part as “encouraging allied investment in America’s industrial future” to confront Chinese manufacturers.
But Japan and South Korea are also competing against China — which is aggressively positioned in electric cars, computer chips and other technology. There is a risk that forcing investment in the US will weaken allies geographically closer to China, said Christopher Smart, managing partner at Arbroath Group, a geopolitical strategy firm.
“They need to invest in their countries,” said Smart, who was a top economic aide in the Obama White House. He said Trump would “extract investment money” from these countries while also erecting “tariff walls” that could make it harder for them to sell goods in America, a somewhat unbalanced view of how alliances work.
A few experts believe Japan and South Korea would agree with the Trump administration’s formulation that their American investments are a way to compete against China.
“It’s really about lowering tariffs and avoiding Trump’s wrath,” said Andrew Yu, a senior fellow at the Brookings Institution’s Center for Asian Policy Studies.
William Chu, a senior fellow focused on Japan at the Hudson Institute, a conservative think tank, said there are expectations that Japan and South Korea want to resolve any obstacles to investments and will take steps to make “progress” in talks with Trump.
Chu pointed out Nippon Steel Company’s agreement to purchase US Steel This year is an example of how Japan can work with the Trump administration. The president had initially opposed the merger, but later supported it with an agreement that gave the US government some control over the acquired company.
Likewise, the memorandum of understanding on Japan’s $550 million investment would also give the US government input on how the money will be spent. The agreement stipulates the formation of a committee headed by Trade Minister Howard Lutnick to propose investments, and gives Japan 45 days to respond, on the basis that the deals will give preference to Japanese contractors and suppliers.
“Japan has completed the paperwork,” Lutnick said in an interview with CNBC in September. “They gave us $550 billion to invest for America, build the Alaska Pipeline, build nuclear power plants, improve your grid, and produce generic antibiotics in America.”
South Korea has not yet finalized a written agreement with the United States on the $350 billion investment, which is a problem because high US tariff rates still apply to its cars. South Korean officials have rejected US demands for advance payments, which they say would put the country at risk of a financial crisis. Instead, they proposed delivering the investment through loans and loan guarantees.
Upon his return to South Korea on Sunday after talks in Washington, Kim Yong-beom, the presidential chief of staff for policy, told reporters that progress had been made, although he declined to provide details.
“We are close to reaching an agreement that we must reach mutually beneficial (deals) that the Republic of Korea can afford,” Kim said. “The United States fully recognizes and understands potential shocks to the Republic of Korea’s foreign exchange market.”
The proposed South Korean investment represents more than 80% of its foreign currency reserves. South Korea has proposed a currency swap with the United States to mitigate potential financial instability caused by the investment, but no agreement has yet been reached.
The Trump administration’s immigration raid on September 4 Hyundai car factory in GeorgiaIt led to the arrest of more than 300 South Koreans and led to tense relations. This came less than two weeks after Trump met with South Korean President Lee Jae-myung, and led to calls in South Korea to ensure that its workers working in the United States receive legal protection.
Since that raid, the South Korean Foreign Ministry said the United States has now agreed to allow South Korean workers on short-term visas or a visa waiver program to help build industrial sites in America.
South Korean companies are likely to hesitate to make further investments in the United States unless they improve their visa system, Lee said.
“When you build a factory or install equipment in a factory, you need technicians, but the United States doesn’t have that workforce and yet they won’t issue visas to allow our employees to stay and do the work,” he told me last month.
Trump said his tariffs will stimulate new investments that will ultimately produce job opportunities for American citizens.
“Without tariffs, this is going to be hard work for this country, big work,” Trump said on Wednesday.
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Kim reported from Seoul.