The Hanwha Philly Shipyard in Philadelphia is where President Donald Trump will allow South Korea to build a nuclear-powered submarine, according to an agreement between the two countries. Photo courtesy of Hanwha Ocean
South Korean analysts have welcomed the new trade and investment agreement with Washington, announced Wednesday to coincide with U.S. President Donald Trump’s visit to the country this week.
Under the deal, South Korea will invest $200 billion in cash and $150 billion in shipbuilding and other industrial cooperation in the United States, with an annual cap of $20 billion.
In return, the United States will cut tariffs on Korean-made products from 25% to 15%, as initially agreed in late July. The compromise was reached after a meeting between Trump and his Korean counterpart, Lee Jae Myung, on the sidelines of the Asia-Pacific Economic Cooperation Summit.
The automotive industry, including Hyundai Motor and Kia, is expected to benefit immediately, as the U.S. market is one of their largest export destinations.
The two automakers, including Hyundai’s premium brand, Genesis, sold more than 1.7 million cars in the United States last year.
“At last, our carmakers will be able to compete with their global rivals from Europe and Japan on a level playing field,” Daelim University automotive professor Kim Pil-soo told UPI.
“The trade agreement is projected to offer annual benefits of about $3 billion to Hyundai and Kia. Their fourth-quarter performance should improve substantially compared to the disappointing results earlier this year,” Kim added.
Hyundai reported Thursday that its third-quarter operating profit decreased nearly 30% year-on-year to $1.78 billion, although its sales rose 8.8% to $32.79 billion.
Another key beneficiary will be South Korea’s shipbuilding industry. Trump said his administration would share propulsion technology allow its East Asian ally to build a nuclear-powered submarine.
Trump said the submarine would be built at Hanwha Philly Shipyard in Philadelphia, which the South Korean conglomerate Hanwha Group acquired late last year.
For decades, South Korea has sought to develop nuclear-powered submarines to bolster its underwater defense capabilities against military threats from the belligerent North Korean regime.
Observers welcome the U.S. decision. However, some questioned whether the Philadelphia shipyard is an appropriate site for construction, noting that it lacks the necessary facilities.
“It will take at least three to five years just to establish the required infrastructure. And a nuclear submarine built at Hanwha Philly Shipyard would cost three to four times more than making it in Korea due to high logistics and labor expenses,” Hanyang University professor Moon Keun-sik, a former South Korean Navy captain, said in a phone interview.
“If the U.S. insists on using Hanwha Philly Shipyard, the nuclear submarine project is feared to easily fall apart. The two sides are required to establish a consultative body right away to discuss details,” he said.
South Korean Minister of National Defense An Kyu-baek told lawmakers during a parliamentary audit Thursday that “additional discussions should be held between Washington and Seoul.”
Meanwhile, some analysts cautioned that the two countries should iron out several outstanding issues before signing the final trade agreement, particularly those involving semiconductors and agriculture.
U.S. Commerce Secretary Howard Lutnick said on social media that South Korea had agreed to fully open its markets, and that the deal does not include semiconductor tariffs.
However, the Seoul administration maintained that it blocked any further opening of markets in the agricultural sector and that the United States agreed to impose semiconductor tariffs under conditions no less favorable than those applied to Taiwan.
“Since both sides have yet to come up with fact sheets on the agreement, the final negotiations appear to be still underway,” said economic commentator Kim Kyeong-joon, formerly vice chairman at Deloitte Consulting Korea.
“Against this backdrop, it seems that there are still disputes on the semiconductor duties, as well as the additional opening of agricultural and livestock markets,” he said.
South Korea is particularly sensitive to semiconductor tariffs because the country is home to the world’s two largest memory chipmakers, Samsung Electronics and SK hynix.
In addition, South Korea permits imports of U.S. beef from cattle under 30 months of age, a policy rooted in past concerns over bovine spongiform encephalopathy, otherwise known as mad-cow disease.
Washington has asked Seoul to lift the restriction.
