Chey Tae-won says 80% of trade gap recycles into US economy
As the widening US trade deficit has been the main impetus behind US President Donald Trump’s sweeping tariff plans, South Korea, which contributes to the US’ trade deficit, is bracing for potential impact, as Trump plans to announce "reciprocal tariffs" on trading partners next week.
Many expect there will be increasing pressure from Washington for Seoul to address the trade imbalance. However, the numbers do not tell the full story, according to Chey Tae-won, chairman of SK Group, who serves as the head of Korea Chamber of Commerce and Industry, the nation’s largest business group.
Chey acknowledged that the US trade deficit with South Korea has grown considerably over the past eight years, spanning both Trump’s first term and the Biden administration.
“But nearly 80 percent of the trade deficit amount has returned to the US in the form of foreign direct investment,” Chey told reporters Tuesday during a press conference held at the KCCI building in Seoul.
“Over the past eight years, South Korea has become No. 1 in terms of the amount of investments in the US,” said Chey. “But being the top investors is like two sides of the same coin; trade deficits are bound to occur."
This is because 70 to 80 percent of the investments were in greenfields, where companies build new manufacturing facilities from scratch, Chey explained. To build manufacturing facilities in the US, Korean firms had to import equipment, intermediate goods and machinery from Korea, as the US doesn’t produce many of the components or machinery needed to do so.
Chey said he relayed this explanation to White House officials, including US Secretary of Commerce Howard Lutnick, when he was in Washington last month, where he led a business delegation of executives from Korea’s top 20 companies. At the time, Chey highlighted that Korean companies have invested $160 billion in the US over the past eight years, with a focus on the manufacturing sector.
Besides reiterating their commitment to ongoing investment, Chey said the delegation proposed increasing imports of US goods to address any trade imbalance, particularly in the energy sector, such as LNG and crude oil.
“Since South Korea needs to import energy anyway, we can reduce our dependence on the Middle East. And if the US is willing to export, we are willing,” said Chey, stressing that the intention isn’t to increase total energy imports, but to shift the sourcing ratio between countries.
In addition to trade issues, South Korean companies proposed new areas of cooperation where both countries can benefit. The KCCI identified six potential areas where Seoul and Washington can create synergy: shipbuilding, energy, nuclear power, AI and semiconductors, mobility and materials and equipment.
In response, Lutnick -- who had not yet been sworn in at the time of the meeting -- expressed a strong desire to attract more investment, saying the US would provide benefits and credit in return for foreign investments.
When asked whether SK Group is considering additional investments in the US, Chey said existing plans would proceed as expected.
“There are already investments in the pipeline and those will go ahead as planned,” said Chey. “There are factors like subsidies and other policy issues and external situations, but for now, it’s ‘business as usual,’ and I don’t see this as being linked to the tariff policy.”
Beyond tariffs and trade, Chey also raised concerns about growing uncertainty within South Korea, both political and economic.
“Our greatest concern is that the unknown is getting too big,” said Chey. “The more uncertainty expands, the harder it becomes for companies to make decisions, and eventually decision-making is delayed."
sahn@heraldcorp.com
