By Troy Stangarone
Donald Trump is set to return to the White House later this month. Many world leaders are apprehensive about his return and unsure how to best manage relations with the incoming Trump administration.
While there are some unique aspects to each country’s concerns, for South Korea, the uncertainty comes from economic policies that will have a negative impact on the Korean economy, pressure on South Korea to contribute more to defense and whether any new approach to North Korea does or does not include Seoul’s views on how to manage relations with Pyongyang. These concerns are only heightened by Seoul’s own domestic political uncertainty stemming from the impeachment of President Yoon Suk Yeol. That uncertainty, however, can be managed to an extent if South Korean businesses and politicians have a better understanding of Trump’s tactics and motivations.
While Trump works to foster an appearance of unpredictability, he uses the uncertainty he creates through his seemingly contradictory statements and actions to produce leverage. Developing leverage is a key component of Trump’s approach to policy. Whether threatening to withdraw from the U.S.-Korea Free Trade Agreement or threatening “fire and fury” on North Korea, Trump is working to develop leverage on potential negotiating partners. Scott Bessent, Trump’s incoming treasury secretary, has suggested as much about Trump’s more recent tariff proposals.
In this context, it’s important to keep in mind beliefs that Trump has held going back to the 1980s, that the United States is being ripped off in both trade and national security by its allies. In 1987, he said: “A lot of people are tired of watching other countries ripping off the United States. … They laugh at us behind our backs. They laugh at us because of our own stupidity.” That same year, in an ad in The Washington Post, Trump castigated the United States for protecting oil shipments from the Middle East, saying, “The world is laughing at America’s politicians as we protect ships we don’t own, carrying oil we don’t need, destined for allies who won’t help.”
It has often been said of Trump that he should be taken seriously, if not literally. In the case of trade and expecting more from allies, Trump should be taken seriously given his long history on these issues even if the amount of tariffs on any specific country, for example, should not be taken literally. But there is also an element of personal grievance that can be seen in his comments.
But why does Trump view American trade relations and relations with allies so negatively? Trump’s background in business, specifically real estate, may provide insight. In the real estate industry, the goal is to extract rent from a property. The higher-end the property, the more rent that can be extracted. In this context, there is no supply chain or comparative advantages from trade that might benefit multiple companies or countries, only the property from which to extract rent. Hence, you are either winning or losing rather than the win-win dynamic that policymakers have pursued since the end of World War II in the West and globally since the end of the Cold War.
For Trump, trade agreements and alliances are properties from which the United States has not been extracting the rent that it could for the world’s largest economy or most powerful military. That the United States has run trade deficits with countries like South Korea or that much of NATO has only recently begun to meet its own spending requirements are just proof for Trump. It is this viewpoint that has led Trump to believe that U.S. allies and partners have been “ripping” the United States off.
What can South Korea do in this context? In the short term, Korean firms need to be more aggressive in defending their interests with the Trump administration than they have been with prior U.S. administrations. During Trump’s first term, there was a process put in place for firms to get exemptions from the tariffs imposed on China. Pursuing future exemptions to tariffs will be key.
In areas of policy, it will be important for Korean firms to demonstrate to the Trump administration how investments under the Inflation Reduction Act and the CHIPS Act will grow U.S. manufacturing jobs during the Trump administration and how the plans they have for future investments will as well. As firms develop these investment plans, something Trump will expect, they will need to avoid the mistakes of SoftBank CEO Masayoshi Son, who pledged to invest $100 billion in the United States only to have Trump push him to double that amount.
Once the current political crisis is settled, the South Korean government will need to play a larger role. Reducing the trade deficit should be an initial step, but it will need to engage Trump in substantive ways that address his concerns while also factoring in South Korea’s own national interests. Simply trying to hold the line on trade or burden sharing will not be sufficient.
Troy Stangarone is the director of the Hyundai Motor-Korea Foundation Center for Korean History and Public Policy and the deputy director of the Indo-Pacific Program at the Woodrow Wilson Center.
