Five Things to Watch in South Korea’s Lee First Trump Meeting

When South Korean President Lee Jae Myung meets with Donald Trump at the White House for the first time on Monday, the Asian leader will face his biggest test since taking office less than three months ago.

Lee heads to the Oval Office after securing a trade deal that resulted in the Trump administration slapping 15% tariffs on imports from the key supplier of cars, smartphones and machinery. Potential flashpoints looming over the bilateral talks range from unresolved points related to the trade deal to how best to manage simmering security threats in Asia.

Speaking to reporters on his flight to Washington, Lee said he was determined to protect the interests of his citizens. “Even now, there is a clear perspective from the US side that the negotiations are looking favorable for South Korea,” Lee said. “But we don’t think it’s desirable to so easily overturn or alter an agreement that has been reached.”

Here are five things to look out for: 

$350 Billion Investment Fund 

One potential source of tension will be details pertaining to South Korea’s $350 billion fund for projects in the US. When he announced the trade agreement on July 31, Trump said investments from the fund would be directed by the president himself, and that 90% of the profits would flow back to the US.

South Korea has released few details on how it sees the fund playing out, but authorities have said it would be largely structured as loan guarantees, with the actual equity commitment likely remaining below 5%. 

Of the total amount pledged, $150 billion is to be allocated for shipyards to help stimulate the moribund US shipbuilding industry, and Lee plans to wave the flag when he visits a shipyard in Philadelphia during his trip. 

It remains to be seen whether the leaders will be able to agree on how they see the fund functioning, including a timeline for when the money will be disbursed.

Lee will be joined by leaders of South Korean companies including Samsung Electronics Co., SK Hynix Inc., LG Energy Solution Ltd. and Hyundai Motor Co.

The Hankyoreh newspaper earlier said South Korean companies may announce up to $150 billion in US investment plans at the summit. Several Korean firms already have existing US investment plans, including Samsung’s multibillion-dollar semiconductor plant in Texas and Hyundai Motor’s $21 billion pledge for vehicle and steel facilities.

“The summit risks friction that could threaten the broader framework if Trump decides Korea is falling short of his expectations,” Bloomberg Economics’ Adam Farrar said. “In a bid to head off such concerns, major Korean conglomerates are likely to announce further investments in the US, as previewed by Trump after the announcement of the trade agreement.”

Agriculture Market, Tariffs on Autos, Chips

Any perceived retreat by Lee on agriculture — giving American farmers greater access to South Korea’s beef and rice markets — would risk spurring domestic backlash.

South Korea earlier said rice and beef were excluded from the concessions it made in the negotiations, citing their political sensitivity. But Trump has said South Korea would be “completely open” to trade with the US, including its markets for agricultural goods. The comments leave open the possibility there could be differing interpretations of the pact, as was the case with Washington’s deals with China and the UK.

Most sectors in South Korea’s economy will take a hit from Trump’s barrage of tariffs, making it difficult for the agriculture industry to insist it should be exempt from the pain. In terms of economic output, the farming sector generates about 1.5% of gross domestic product. In contrast, the automobile and semiconductor industries are key drivers of the nation’s total exports, which are equivalent to more than 40% of the economy. Chips accounted for around 21% of exports last year, while cars comprised around 10%.

South Korea is expected to push for lower sectoral tariffs on key export items, including auto parts and semiconductors. Whether Lee will ultimately concede ground on the country’s agricultural sector — a crucial support base for his liberal party — in exchange for better terms for exporters remains to be seen.

Defense spending, which Trump has repeatedly framed in blunt financial terms, is at the heart of issues spanning politically fraught questions over the number of US troops stationed in South Korea to the Asian country’s role in the broader regional security framework.

Trump has been urging US allies to ramp up spending on security and rely less on the US. Against that backdrop he referred to South Korea as a “money machine.” The nation hosts 28,500 American troops to help deter threats from North Korea.

While the defense cost-sharing issue wasn’t addressed by tariff negotiators, a senior South Korean official earlier confirmed that the two countries are discussing expanding Seoul’s defense spending in line with global trends. South Korea plans to spend 2.32% of its GDP on defense this year.

One area of diplomacy where Lee and Trump may find common ground is the approach toward North Korea, as both are seeking a departure from the approach taken by their predecessors.

Trump and North Korean leader Kim Jong Un met in person three times during the US president’s first term, with those interactions failing to convince Kim to curb the development of his nuclear weapons program. North Korea has since rebuffed the idea of sitting down with the US and has emerged as a key ally of Russian President Vladimir Putin, supporting his war on Ukraine.

Kim last week called for the “rapid expansion” of his country’s nuclear weapons program, ramping up tensions just as the US and South Korea commenced joint military drills that Pyongyang views as a prelude to war.

“North Korea, of course, will be on the agenda, but the summit likely will not create an opening for either country’s engagement with Pyongyang unless the two presidents agree to suspend US-ROK joint military drills and drop North Korea’s denuclearization as a policy goal,” said Rachel Minyoung Lee, a senior fellow at the Stimson Center.

This article was generated from an automated news agency feed without modifications to text.