South Korea Faces Trade Tangles and Tariff Terrors Ahead of Snap Election—Can They Seal Deal with the U.S.?

South Korea’s Vice Minister of Trade, Industry, and Energy, Park Sung-taek, stated on Monday that it is "theoretically impossible" for South Korea to agree on a comprehensive trade package with the United States before the country’s presidential election on June 3, according to Reuters report.

Even before the July 8 deadline for the U.S. to lift a pause on reciprocal tariffs, Park pointed out that challenges to reaching a deal were significant.

Can South Korea Seal Deal with the U.S.?

In the past week, the two countries agreed to craft a trade package aimed at removing new U.S. tariffs.

However, Park emphasised that the special political situation in South Korea, with an acting president following the ousting of former President Yoon Suk Yeol in December, would complicate any swift agreement.

"We fully explained our political situation to the U.S. during our latest talks. The U.S. side also understands that Korea's special political situation could be a limiting factor in negotiations," he said.

With South Korea heading into a snap election, it may be difficult for the country to commit to large-scale energy projects and defence cost agreements.

Also Read: Trump Proposes Income Tax Cut To Offset Impact of Tariffs, Says 'We Will Make A Lot Of Money'

"To be honest, I think it would be very challenging for the talks to bear some fruit within the next 70 days despite President Trump's expectations," Park added.

South Korea Requesting Exemptions

South Korea is requesting exemptions from U.S. tariffs on items like autos and steel and offering cooperation in areas like shipbuilding and energy. Park also flagged the U.S. Jones Act, a law requiring U.S. ships to transport goods between U.S. ports, as a barrier to smoother trade relations.

Additionally, Park confirmed that South Korea is considering sending a delegation to Alaska to discuss a $44 billion liquefied natural gas project with the U.S., which the U.S. hopes to fund with investments from countries like South Korea and Japan. South Korea aims to set up working groups on tariff exemptions, economic security, and investment cooperation with the U.S. soon.

South Korea Trade Data

Meanwhile, South Korea’s exports are forecasted to have dropped in April, partially due to President Trump’s tariffs on cars and steel. According to the Reuters Survey, exports are expected to have fallen by 2.0% year-on-year in April, marking the first drop in three months. "The impact of tariffs is starting to show up, not only on soft data, but also on hard data," said Stephen Lee, an economist at Meritz Securities.

Despite the overall decline in exports, South Korea’s chip sector, its largest export item, remained resilient. Exports to the U.S. dropped 14.3%, while those to China fell 3.4%. South Korean automakers are becoming more pessimistic about the outlook, but chipmakers remain optimistic due to strong demand.

As South Korea prepares to report its official trade data for April on May 1, the nation faces the dual challenge of managing its trade relations amid a delicate political transition and global trade uncertainties.