Trump’s big, costly, coercive trade deals falling apart in Asia
Korea says it can’t pay $350 billion ‘signing bonus’, Japan rethinks $550 billion transfer while China avoids any deal at all
by William Pesek October 1, 2025
SEOUL – American economist Anne Krueger, 91, has witnessed a great deal of public policy chicanery during her stints as a top executive at the International Monetary Fund and World Bank.
Yet Donald Trump’s tariff gamble on South Korea — including a US$350 billion “ signing bonus” — has the battle-tested Krueger, who has also seen her share of financial crises, literally shaking her head with a mix of confusion and disgust.
“Korea is going to be hurt if all of this happens,” she said in an interview in Seoul. “Other countries will be harmed, but not as much as the US will harm itself.”
Korean President Lee Jae-myung’s thoughts have arrived at a similar place. As he told Reuters, Trump’s ask — equivalent to more than 18% of Korea’s gross domestic product — will push the economy to the brink of near collapse if fulfilled.
“Without a currency swap, if we were to withdraw $350 billion in the manner that the US is demanding and to invest this all in cash in the US, South Korea would face a situation as it had in the 1997 financial crisis,” Lee said.
Over the weekend, Korea’s National Security Adviser Wi Sung-lac left no doubt that Seoul has decided that forking over 70% of this year’s national budget and the equivalent of 80% of foreign exchange reserves to Trump immediately is simply not feasible.
“Our position is not a negotiating tactic,” he told Channel A News. “It’s objectively and realistically not a level we are able to handle. We are not able to pay $350 billion in cash.”
Japan is having its own second thoughts. Over the weekend, lawmaker Sanae Takaichi, one of the two frontrunners to replace Shigeru Ishiba, signaled that a renegotiation of the US tariff deal — which includes a $550 billion payment — might be in order.
“We must stand our ground if anything unfair that is not in Japan’s interests comes to light in the process of implementing the deal,” Takaichi said on local television about the hundreds of billions of dollars Trump World is demanding from Tokyo. “That includes a potential renegotiation.”
This will all surely enrage the eruptible Trump. Yet even the best-case scenario for Japan could provoke a strong White House response. On Wednesday (October 1), Japan’s top trade negotiator, Ryosei Akazawa, insisted that the yen will be just fine if the $550 billion fund materializes.
“We will operate with caution to make sure that the yen doesn’t weaken, causing a rise in import prices for Japan,” he said. “We’d calculated that $550 billion is a scale where we can operate without impacting foreign exchange.”
Yet he also made clear that Trump’s demand for immediate cash is a non-starter. Tokyo would finance the package through a combination of investments, loans and loan guarantees over several years via government-linked organizations. Such entities are notoriously cautious, slow and bureaucratic – and thus sure to raise Trump’s hackles.
asiatimes.com |
