Trump's "bully-style agreement" triggers backlash: After Europe, anger spreads to Japan and South Korea

From Europe to Asia, traditional U.S. allies’ dissatisfaction with its “bullying” trade agreements is steadily escalating. After Europe was left frustrated by the U.S.'s unilateral expansion of steel and aluminum tariffs, Japan and South Korea also began to question the nearly trillion-dollar investment agreements they reached with the U.S. According to media reports, just last week, Trump angered South Korea and Japan—two longtime allies—in the span of only 24 hours. Last week, U.S. immigration officers raided the Hyundai-LG factory construction site in Georgia, arresting hundreds of South Korean nationals. Meanwhile, a U.S.-Japan trade agreement memorandum signed by Trump showed that the usage rights of $550 billion in investment would be entirely at Trump's discretion, and if Japan objected, it would face higher tariffs. The report noted that South Korea’s Chosun Ilbo questioned in an editorial: “This inevitably raises the fundamental issue of what ‘alliance’ with the U.S. really means.” Political and business leaders throughout South Korea and Japan generally believe that their countries have been coerced and are beginning to reexamine whether they should continue to comply with Trump’s demands. Analysts point out that these developments show Trump’s tactic of leveraging trade negotiations for his political agenda is testing the limits of America’s relations with its core allies. Europe’s Omen: Expanded Tariffs Roil Business Community The Trump administration’s unilateral trade policy first triggered a strong backlash in Europe. According to CCTV News, on August 15, the U.S. announced it would expand its 50% tariffs on steel and aluminum imports, adding hundreds of derivative products to the tariff list. This move means European manufacturers now face actual tariffs far higher than the 15% baseline agreed to in July. As previously noted in an article by Wallstreetcn, Bertram Kawlath, president of the German Mechanical Engineering Industry Association, pointed out that about 30% of EU exports of machinery products to the U.S. will now be subject to a 50% tariff on their metal content. For a $1 million machine in which steel accounts for 20% of the cost, total tariffs would reach $220,000, equivalent to a 22% overall tariff rate. Some European companies have already suspended exports to the U.S. After the new rules took effect, German Krone Group stopped exports and production for the U.S. market and placed 100 workers on leave. European Parliament Trade Committee Chairman Bernd Lange questioned: “Since European producers now have to pay not only a 15% tariff but also additional steel and aluminum tariffs, why should the EU grant the U.S. zero tariffs on motorcycles?” Lange stated bluntly that the current U.S.-EU agreement “lacks security and predictability.” He said that under these circumstances, he expects lawmakers will demand amendments to legislation aimed at reducing tariffs on certain U.S. exports to Europe. This sentiment has been echoed in the business community, as the reluctant acceptance of the original agreement is swiftly turning into open opposition. South Korea’s Dilemma: Investment Promises Face Real-World Shock It was reported that the U.S. immigration officers’ raid on the Hyundai-LG factory has become a major obstacle in the U.S.-South Korea trade agreement negotiations. This factory is the flagship project of two of South Korea’s most well-known enterprises, and the raid led to the detention of more than 300 Korean workers. South Korean President Lee Jae Myung said on Wednesday that Korean companies were “perplexed” by the raid because “they’re not long-term or permanent workers, but skilled technicians helping install facilities and equipment.” He warned that “If the U.S. does not help these personnel work safely in the U.S., Korean companies will ‘hesitate to invest directly.’” South Korean Foreign Minister Cho Hyun told parliament on Monday that in light of the Georgia plant incident, South Korea is demanding more visa quotas for Korean workers in trade negotiations. The report noted that Chosun Ilbo, traditionally a pro-alliance conservative newspaper, urged officials in a Monday editorial to convey South Korean public doubts to the U.S.: “This inevitably raises the fundamental question of what the ‘alliance’ truly means for the U.S.” Public outrage is complicating U.S.-South Korea trade agreement negotiations. According to an agreement reached at the end of July, the U.S. agreed to cut tariffs on South Korean goods from 25% to 15% in exchange for a $350 billion investment commitment from Korean firms in the U.S., including a reserved $150 billion specifically for strengthening the U.S. shipbuilding industry. However, South Korea has clearly stated it will not accept an investment deal similar to Japan’s. Kim Yong-beom, chief policy coordinator in President Lee Jae Myung’s office, said on Tuesday at a public forum: “No Korean will sign that draft as it stands.” Kim Yong-beom added that the government would not move forward with the shipbuilding investment plan without an agreement on how the remainder of the U.S. investment would be arranged—Korean officials have called this the “Make America Shipbuilding Great Again Initiative.” Speaking about the negotiation difficulties, Lee Jae Myung said: “We will not make decisions contrary to national interests. We will not engage in irrational or unfair negotiations.” Currently, South Korea and the U.S. are negotiating this week, trying to resolve the specific arrangements for Korean investment. However, the ongoing deadlock shows that Trump’s “Art of the Deal” is now facing ever-stronger resistance from ally countries. Japan’s Compromise: Sovereignty Concessions Spark Controversy According to reports, the agreement between Japan and the U.S. is serving as a “cautionary case” for South Korea’s negotiations; some commentators believe Japan has “ceded fiscal sovereignty” to Trump. Details released in Japanese media reveal the agreement has several striking terms. Trump will choose Japanese investment projects. Once the selection is made, Japan has 45 days to review and fund the investment. If Japan chooses not to proceed, Trump can levy tariffs at higher rates of his choice. Regarding the distribution of investment returns, Japan will first receive half of the cash flow generated by the investment until a certain threshold is achieved. Thereafter, Japan will get 10% of the cash flow, with the remainder belonging to the U.S. Masahiko Hosokawa, former senior official at Japan’s Ministry of Trade, said the Japanese government had to agree to these terms for “damage control” to lower auto tariffs. But he believes the process is unlikely to unfold in the way Trump administration officials have claimed: “It’s wrong to believe that if the U.S. asks for money, Japan will simply hand it over. Japan is not America’s ATM.” David Boling, Eurasia Group director for Japan and Asian trade, said Japan had no choice but to accept Trump’s terms. A tough confrontation with the White House was not an option since the U.S. had shown it was willing to retaliate and impose layers of tariffs to unbearable levels. “For Japan, truly protesting is very dangerous and could invite retaliation. This is the reality when dealing with Trump; you have to be very pragmatic.” Risk Reminder and Disclaimer The market carries risks, investment requires caution. Nothing in this article constitutes individual investment advice, nor does it take into account the special investment goals, financial situation, or needs of any particular user. 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