South Korea May Face Uphill Energy Battle in U.S. Trade Deal

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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--A U.S. trade deal with South Korea clears major economic hurdles for the country, its president said, though some of the energy agreements in the package may be out of reach.

Both governments on Wednesday announced the preliminary terms of a trade arrangement that called for a 15% blanket tariff on South Korean imports to the U.S. economy. U.S. President Donald Trump had threatened tariffs as high as 25%, which would be damaging to South Korea's export-dependent economy.

South Korean President Lee Jae Myung turned to social media to declare victory, saying the economy has passed a major hurdle.

"Through this agreement, the government has eliminated uncertainties in the export environment and created conditions for our companies to compete on equal or superior terms with major countries," he wrote on Facebook.

Lee emerged victorious after an attempt to impose martial law led to the downfall of former Preside Yoon Sok Yeol.

South Korea's economy is in good shape. A profile from the World Bank found its economy enjoyed "remarkable success" as gross domestic product (GDP) improved by an annual rate of 5.7% on average from 1980 to 2023.

More recently, the Bank of Korea reported that GDP increased by 0.6% during the second quarter, overcoming a 0.2% contraction during the three-month period to May 31. Led by superconductors, South Korea exports increased 4.2% from first-quarter levels.

Trump turned to his own social media platform, Truth Social, to say the details of an arrangement by South Korea to invest $350 million in the U.S. economy and buy some $100 billion worth of liquefied natural gas (LNG) and other energy products need to be ironed out.

"This sum will be announced within the next two weeks when the president of South Korea, Lee Jae Myung, comes to the White House for a bilateral meeting," he wrote.

The energy deal follows similar arrangements made with members of the European Union (EU). The EU will see its baseline tariff increase from 10% to 15%, though Trump earlier had threatened rates as high as 30%. Europe over the next three years is also obligated to purchase some $750 billion worth of energy products, from nuclear fuel to LNG.

Data from the EU show the United States, the largest LNG exporter in the world, overtook Russia to take the No. 2 spot in terms of the bloc's market share. While the Trump administration has advocated heavily for LNG, it's largely up to individual companies to make the offtake agreements, not their host governments.

Asian economies such as South Korea's, meanwhile, rely heavily on foreign suppliers for their energy resources. Blocked northward by the war-time border with North Korea, South Korea has no international oil and gas pipelines, so its maritime trade arteries are essential.

But like the EU deal, which outlines energy commitments exponentially greater than historic trends, South Korea might have an uphill battle securing supplies of LNG from the United States.

Federal data from last year show the Netherlands, with its busy port at Rotterdam, was the largest consumer of U.S.-sourced LNG last year, with around 463 billion cubic feet. South Korea took in 289 billion cubic feet annually.

Nearly all of the functioning eight terminals that deliver LNG from the United States are on the Gulf Coast, making for a long journey to Asia relative to other suppliers such as Australia.

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