South Korean Trade Minister Yeo Han-koo will meet with US officials in Washington this week for the third round of technical tariff discussions.

He plans to raise concerns from South Korea’s semiconductor industry about potential US policies that could affect chipmakers operating in China.

Yeo stressed the need for careful consideration, warning that new measures could hinder manufacturing activities.

The discussions are part of ongoing efforts to reduce tariffs between the two countries.

While a July 8 deadline was proposed, Yeo said the talks might extend due to political and economic uncertainties in the US.

He also plans to meet with White House and Congressional officials to address broader trade issues, including a US request for South Korea to ease import rules on American beef.

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🔗 Source: Reuters

🧠 Food for thought

1️⃣ South Korean chipmakers caught in a deepening US-China tech rivalry

South Korean semiconductor giants like Samsung and SK Hynix maintain significant manufacturing operations in China while simultaneously investing billions in the US market.

These companies face increasing pressure as the US has imposed strict export controls on semiconductor technology to China, aiming to prevent advanced manufacturing capabilities from reaching Chinese firms 1.

The Biden administration’s expansion of controls in October 2022 has created a particularly challenging environment for South Korean firms that rely on operations in both markets 1.

This predicament explains why South Korea’s trade minister is raising concerns about potential restrictions on foreign chipmakers in China during US-South Korea trade talks.

The Netherlands has announced plans to restrict semiconductor technology exports to China in alignment with US efforts, which could further complicate South Korea’s position 2.

2️⃣ High-stakes economic interdependence driving negotiation leverage

South Korea has strategically positioned itself as the largest foreign investor in the United States, driven significantly by incentives from the CHIPS Act 3.

Major investments like Samsung’s $37 billion semiconductor plant in Texas and SK Hynix’s $3.87 billion facility demonstrate the deep economic ties that provide South Korea with negotiating leverage 4, 3.

These investments align with South Korea’s own $23.25 billion semiconductor fund, creating parallel national strategies that could be disrupted by new restrictions 5.

The potential 25% US tariff on exports represents a significant threat to South Korea’s semiconductor industry, explaining President Lee Jae Myung’s statement that there is “no need to rush into a trade agreement” 4.

The July 8 deadline for trade negotiations comes during a period of political transition in South Korea and economic uncertainty in the US, further complicating the high-stakes discussions.

3️⃣ Global semiconductor supply chain increasingly shaped by geopolitics

The US is developing new measures to close loopholes in semiconductor export controls, specifically targeting shipments of powerful GPUs essential for AI through third-party countries to China 6.

China has responded aggressively to US restrictions, with industry associations warning against purchasing US chips and the government banning exports of certain rare minerals critical for semiconductor production 7.

This escalation demonstrates how the semiconductor industry, once driven primarily by technical and economic factors, is increasingly shaped by national security concerns and geopolitical competition.

The outcome of these trade talks will set important precedents for how allied nations navigate competing interests in technology sectors that are simultaneously commercial priorities and national security concerns.

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