In this episode of the Trade War Podcast, host Stan McCoy is joined by notable guests Yeo Han-koo, former trade minister of South Korea, and Wendy Cutler, former United States trade negotiator and vice president of the Asia Society Policy Institute. The discussion centers on the impact of recent U.S. tariffs on Asia-Pacific trade, emphasizing the Korea-US Free Trade Agreement and broader regional implications.

Mentioned

• Yeo Han-koo, “Korea's economy faces looming challenges amid political turmoil,” (PIIE, January 2025)
• Wendy Cutler, “RCEP Agreement: Another Wake-up Call for the United States on Trade,” (Asia Society, November 2020)
• Ralph Ossa, “Global trade faces setback amid rising tariffs,” (WTO, April 2025)
• “China warns countries not to strike trade deals with US at its expense,” (Aljazeera, April 2025)
• Francis Tang, “Japan, South Korea and China vow to strengthen trade ties amid looming U.S. tariffs,” (The Japan Times, March 2025)

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Stan McCoy: Hi everyone, and welcome to another episode of the Trade War Podcast from the Information Technology and Innovation Foundation. I'm your host, Stan McCoy, and this is the series where we delve into the roots and realities of our current global economic conflict. We're recording today's episode on the 22nd of April, so keep in mind that things may change by the time you listen to this or watch this. I'm very pleased to be joined today for an episode titled Pacific Theater by two very distinguished guests. Of course, Pacific Theater is a nod to both the geopolitical platform and to the political spectacle surrounding current US trade policy in the Asia Pacific region. With President Trump announcing sweeping new tariffs, including the Liberation Day package on April 2nd and subsequent modifications, our partners across the Pacific region are undoubtedly watching and reacting in real time and trying to make sense of what has been a complete moving target. Joining me to help unpack all of this are the two exceptional guests on the screen. First, Yeo Han-koo, the former trade minister of the Republic of Korea, and one of the key architects of the modernized KORUS agreement, the Korea US Free Trade Agreement. And second Wendy Cutler, the former US Trade Negotiator and acting deputy US Trade representative who led the KORUS talks for the US side, and also headed up an expansive APAC portfolio that included negotiations with Japan, China, Korea. And since leaving USTR, Wendy has become a leading voice on Asia Pacific Trade Policy and strategy as vice president of the Asia Society Policy Institute. So thank you very much, Minister Yeo and Wendy for being with us on this episode of the podcast. You're bringing very deep experience to this discussion, but also hopefully some strategic insight for our partners across the region.

So let's go right on to the substance of the discussion. And I'd like to start off with that Korea United States Free Trade Agreement that you two both worked so hard on and which has played such a central role in the trade policies of successive administrations. It's now under renewed pressure from a White House that seems to have disowned many or all past US trade obligations. I'm wondering if you can give us some insight maybe starting with you Minister Yeo, on why this administration seems displeased with, KORUS and particularly in light of the fact that the agreement was just updated during the first term of the Trump administration.

Yeo Han-koo: Okay, thanks Stan for having me. I think, this KORUS FTA is really a backbone of US and Korea economic partnership. And it is 13th year in its implementation. And as you mentioned we have gone through this amendment process during Trump 1.0. But on that Liberation Day Korea was shocked that the US decided to impose 25% reciprocal tariff despite our very specialFTA partnership.

So I think this is a really unfortunate evolvement from Korea's point of view. We'll see how the US government and Korea could work out some sort of deal to bring back this KORUS FTA and also explore more win-win, constructive partnership.

Stan McCoy: Wendy, what do you think?

Wendy Cutler: I agree with what Han-koo just said, but I would also just add from the Trump administration's perspective, it seems to be all about the size of the US trade deficit with Korea. And when you look at the size of the deficit now compared to Trump 1.0, I think it's more than doubled, at least with respect to goods.

And that's what the administration's focusing on. That's what their reciprocal trade formula is all about. And so I think that's what's motivating them. But as Han-koo said, we have a good foundation for work and for economic cooperation. So my hope is that through this set of negotiations that's underway, that we find additional areas where we can cooperate and lead the region that also paves the way for the reciprocal tariffs on Korea to be unwound.

Stan McCoy: Yeah, that's a great insight, Wendy. I think the focus on the goods trade deficit is something that has been certainly a point of concern for the ITIF focusing as we do more on technology policy issues that are largely, although not entirely outside the realm of goods trade deficits. And there are plenty of those issues out there. I'm really curious Minister Yeo about how this is playing out on the ground in South Korea, both in terms of public reaction to the approach that Trump administration has taken and in terms of how the government is trying to manage that at what is, as far as I understand, a delicate moment in domestic Korean politics.

Yeo Han-koo: First of all, yes. As Wendy mentioned this the trade deficit that the United States has with Korea seems to be actually one of the, big issues, which caused this kind of 25% But I think it is simple formula that we, saw doesn't really reflect the quality and complexity of these relations, especially.

This Korea's trade deficit is very highly linked to the surging investment from Korea recently. Actually for the last two years Korea was number one in terms of foreign investors in greenfield investment, for example, semiconductor, EV, batteries, et cetera.

And when you invest and then when you build factories in those manufacturing facilities. You need to bring machinery and some of the intermediate good, which are not readily available in the host country at the moment. Korea see this as a more kind of temporary and then more healthy kind of trade deficit compared to you just, import of finish it, the products from, your country. So we need to really capture this qualitative aspect of this very complicated and constructive bilateral relations. And you ask about this delicate, this domestic situation in Korea.

Yeah. You pointed exactly right that right now, the former President Yung was impeached.

It's a campaign mode in Korea andJune 3rdKorea will have an election and the next day a new president will be integrated, although these tens of negotiators from Korea will be coming actually the day after tomorrow in Washington DC for this two plus two meeting. I think the big debate in Korea is whether the current caretaker government has really democratic authority to negotiate and even conclude this two plus two negotiation. So my view is that if you look at each of these issues that President Trump is talking about for example this LNG and this investment. And the Alaska project, even defense sharing, cost sharing.

I think these issue have a ramification for several years to come. So I think it makes sense for the next government to finalize this deal with Trump administration.

Stan McCoy: This discussion that's gonna take place starting in two days, as you pointed out is playing out of course, against the backdrop of years and years of bilateral negotiations between Korea and the United States that you've each been deeply involved with. I'm curious, Wendy, what do you see as the prospects for success of this discussion during the 90 day pause period, and is there enough that Korea can offer to placate the Trump White House?

Wendy Cutler: I think so. I think Korea's a great story to tell vis-a-vis the United States. As Han-koo just said there were, one of the largest foreign direct investors in the United States. Cooperation on energy, AI, technology. And let's not forget shipbuilding. Just last week , came out with its remedies to deal with unfair trade practices by China in this sector.

And the logical partner for the United States here is Korea. Again, I think Korea has a lot to offer and I'm hopeful that the administration will recognize that. What concerns me though is, just getting back to this simple formula that was used to come up with these tariffs, that each country has a unique story to tell, frankly, and that story is not captured in that formula.

For example, if you're an FTA partner by definition. 99% or close to that, if your tariffs are at zero, you don't get credit for that. You don't get credit for all the foreign direct investment you've made in the United States.

Stan McCoy: As Han-koo just said, there's a huge difference between, shipping over machines that are then gonna be used by American workers in a high tech factory to do high tech manufacturing and shipping agricultural products or some other finished product. It'scompletely apples and oranges in terms of the job impact.

Wendy Cutler: So yeah. And so even though the formula didn't capture it, I just hope during the negotiations that these issues do come to the forefront and the US negotiating team recognizes what an excellent partner Korea has been and is and will continue to be. If we can find kind of this win-win way forward.

Stan McCoy: Yeah. I'd like to broaden the aperture a little bit and talk now just not just about Korea, but also about the broader regional implications of what the Trump administration is doing. We've seen China reaching out to US allies and partners even in the last few days, we're hearing that Beijing, Tokyo, and Seoul are engaged in a closer dialogue than usual.

Notwithstanding the somewhat uneasy relationships among those governments, I'm curious minister Ye o, if you can draw on your reservoir of experience to give us some insight on what's going on in that conversation between Beijing, Tokyo, and Seoul. Are those defensive conversations?

Are they strategic conversations? Could they evolve into something more? And I'm curious how you read Xi Jinping's recent trip to three countries in Southeast Asia, if that was a successful bridge building venture on his part.

Yeo Han-koo: Let me first talk about this kind of broader Asian perspective, when it comes to this US China, this competition and this massive tariff from Trump administration and how that could, affect this geopolitical landscape in Asia. I think Asia, there is motivation to diversify and de-risk from this previous China reliant supply chain. I think in case of Korea and Japan if you look at this trade and investment data for the last few years, you see clearly this new trend of trade investment and supply chains de-risking from China.

And also if you look at the Southeast Asian country, I think with all this China plus strategy, many global companies, not just Chinese companies, but Korean, Japanese, European, and even American company, they're investing in the Southeast Asia, sort of alternative production base to diversify from China.

So this has been I think, positive development for the last few years. Which was in part triggered by the US policies of CHIPS Act, and then IRA and all these sort of industrial policy in the US but now this massive tariff on, Korea, Japan, and also all these Southeast Asian countries.

I'm concerned that this, tariff may really, slow down this trend or even kill the momentum happening in this—

Stan McCoy: Well, could find yourself de-risking from the United States, right?

Yeo Han-koo: Yeah, exactly.

Stan McCoy: How do you simultaneously de-risk from both China and the United States?

Yeo Han-koo: Yeah, exactly. So I think the US needs to be cognizant of this kind of changing dynamics due to this massive tariff. And also, recently there was this Korea, Japan, and China. This trilateral trade ministers meeting.

And I got a lot of the questions about is this really strategic kind of shift of Korea, Japan, or just defensive? I see this more as defensive.

Obviously, I think the two, Korea and Japan, the US is a anchor. There's no doubt about it. But also, for the last, four, five decades, this supply chain have been so interconnected between Korea, Japan, and China.

From Korea and Japan's point of view, also, it's important to maintain this stability of the supply chain with China. Yeah, so I think, these are complicated pictures that we see in Asia right

Stan McCoy: How do you see the dynamics of those intra-Asian conversations? Wendy?

Wendy Cutler: Again, we are putting on the table for the rest of Asia a lot of stuff that they are processing and trying to navigate through. It's not just that all of a sudden the China plus one strategy seems to be off the table. We want it all to come to the United States. Don't even think about going to Southeast Asia.

But we're, again, we're putting high tariffs on, many of our allies and partners, many of these countries, not only do they have deep and sophisticated supply chain engagement with China. But many of them have been recipients of a lot of Chinese finance that has helped build their infrastructure as well.

And Chinese companies are very interlinked with many other Asian companies, and the notion that this is all gonna be untangled so these countries can sell to the United States, I think is a bit naive. I think there are ways to deal with our concerns, but the notion that we're going to kind of force Asian countries to if this indeed is the case, but put them in the uncomfortable position where they feel like they need to choose between the United States and China. We might not like that answer. We might not like that response.

Stan McCoy: Yeah. aren't we effectively, pushing them into the arms of—

Wendy Cutler: I don't think we've gone that far, but let's see how these negotiations play out now.

An interesting development over the past 24, 48 hours, China has conveyed its concern and warned the other Asian countries: be careful what you agree to in your pacts with the United States because if you do things that are not in our interest, we are going to counter retaliate. And for many of these countries, they remember they've experienced economic coercive measures by China.

Korea has, Japan has, the Philippines have, and the list goes on and on. And so, this is putting a lot of pressure on these countries as the clock is ticking during this 90-day pause period.

Stan McCoy: That's exactly the reason to have this conversation with you and Minister Yeo about how to navigate between the Devil and the Deep Blue Sea in this 90-day period. Or maybe it's the Deep Red Sea. to change the metaphor a little bit, The uncertainty this is creating is also exacting a pretty serious price that we see reflected in a lot of market volatility. And I think, you were pointing Minister Yeo earlier to the situation of Korean investors in the United States who've built plant and equipment and hired workers here and are now dealing with these kinds of disruptions.

How do you see firms in the Asia Pacific region recalibrating in light of this new policy unpredictability from Washington, and is it going to fundamentally shift the pattern of trade between Asia and the United States?

Yeo Han-koo: I think certainly many big companies in Asia would be interested in investing in the United States. Actually, this morning I found the interesting news that TSMC, the last four years in Arizona this factory, they record this loss, big loss for the last four years despite that their business is really prospering and, they have a really market dominant position right in the foundry business. So, I think that shows the challenges of doing, this manufacturing the United States, in the workforce issue and the cost issue and work culture issues, et cetera.

So, I think that is why some sort of intervention, by the government to make this manufacturing environment more business friendly, the workforce training or constructive intervention that the government can make could be helpful to inducing this investment from Asian countries.

But right now there's a big uncertainty. What is going to happen to CHIPS act, to all the subsidies or, tax incentives or, this workforce or training program. And that was IRA as well. So, I think this uncertainty if really, continues to linger, then I think it could really negatively affect the potential investment from Asia and rebuilding this manufacturing sector in the US.

Wendy Cutler: I would add to this, that when there is uncertainty, businesses tend not to invest. They delay their decision making because they don't know what the outcome's going to be of these negotiations. What are the tariff rates going to be for these countries? And frankly even if we reached a deal with Country X where Country X has agreed to do, let's just say 10 things. I'm sure the administration will wanna have some kind of snapback provision in the agreement, which would basically say if we think you haven't lived up to your commitments, then we're gonna go back to that reciprocal tariff rate.

So unfortunately, I think the uncertainty is going to continue, and if companies then respond by delaying these types of decisions, this was gonna result in a slowdown not only in US growth, but in global growth overall. Which is clearly not in anyone's interest, and it will come on top of all of the tariffs and counter retaliation actions as well.

So, a real drag on the economy.

Stan McCoy: Yeah, it's a great point. Both China and the United States is hedging against international trade generally, and just doing less trade. And I think the latest numbers from the WTO bear out that trade is off on a global level.

So, it may be a drag on the whole global economy. And what about politically speaking in terms of what this does to the future of US relationships in the Asia Pacific region? Even in a post-Trump world, where the United States is having to rebuild a set of relationships.

How do you see the challenges of that, Wendy?

Wendy Cutler: I'll just pass on something that one of my close colleagues from Asia said to me, and that was that, and this was from a partner country. That many of them viewed Trump 1.0 as an aberration, and so when Biden came to office and his team was very intent on rebuilding and strengthening our alliances and partnerships, they were all in, but now they recognize that the Trump phenomenon is here to stay in the United States.

This make America great again, philosophy. And so, their view is that even if the next president comes in with the same determination to rebuild and strengthen alliances that many of our partners may not be a hundred percent in because they don't think they can count on us and they don't know where we're gonna be four years from there.

So, I think we're all living in the moment now and watching these negotiations and these tariffs, but if we take a step back, I think that, even what's happened over the past 90 days or so in Trump's second term, is gonna have a profound impact on US alliances and partnerships, not just in Asia but all over the world.

Stan McCoy: Yeah, I'm afraid you may be right about that, Wendy. I think the case of South Korea is one thattouches me personally in the sense that when I was a kid, we lived on an air base in South Korea for two years. My father was in the Air Force and was commander of Osan Airbase for two years. Very, very personally aware of the importance, not only of our economic partnership, but of our security partnership with South Korea.

Do you see that Minister Yeo as something that is gonna have to be fundamentally rethought in terms of the Korean government's reliance on its partnership with a less reliable United States?

Yeo Han-koo: Stan, I serve as an Air Force officer in Osan Airbase.

Stan McCoy: Fantastic.

Wendy Cutler: There's the connection.

Stan McCoy: If you were there when Colonel McCoy was running things back in the late 1980s, those were the glory days.

Yeo Han-koo: Yeah. Yeah. Okay. So, I think, this US and Korea relations is really so more than just, FTA or economy partnership, there is a really, security this ironclad security and the military alliance, facing Korea. And so I think the US Korea Alliance will be there no matter what.

But I mean in terms of this economic leadership that the US has really played in Asia, I think, when this Biden administration came in and the motive was America is back. So I think many Asian countries really, heartedly welcome the return of the US leadership in this international economic, at first, many Asian country had hoped that US would come back to CPTPP, but this with, in economic framework, I think there was a lot of, a hope among these Asian countries that some sort of substantive US leadership in the supply chain, clean energy, digital economy in all these really important strategy area.

But now we don't really see, we may not see this US leadership in these critical areas. So that's what I'm worried about. What may happen during this next four years or even beyond that. And what I can foresee, what's going to happen for the next four years is that yes, many countries in Asia will try to find new equilibrium with the Trump 2.0. I think they'll be, they're just first order, business.

But after that, I think the logical conclusion for them is to make new friends. You cannot really just rely on United States. So, you have to make new friends, you have to diversify, you have to hedge against whatever political risk you may foresee in the US.

So, I think for the next four years, I expect that, trade and investment among the rest of the countries, and then among, the rest of Asian countries, especially right now, RCEP for example, RCEP really played a role in facilitating this new supply chain formation between China and Southeast Asian countries. I think, I hope that the US could come back to this game as soon as possible, but, for the next four years, I think it'll going to be tough. For the US and the partners in the region.

Stan McCoy: What do you think, Wendy? Is RCEP the new game in town?

Wendy Cutler: I wouldn't go that far, but I do agree that in the current environment, there is a real motivation by our partners in Asia to deepen their internal relations and to promote trade and investment and economic ties and supply chain connectivity. And a lot of this, frankly, is gonna be at our expense.

That said, I also wanna underscore, the US market is huge for these countries, and even though China is the largest trading partner for most Asian trading countries, their largest export market has been the United States. And so the tariffs that you know that we have now paused really surprised, dismayed, but also I think led a number of Asian countries into action to try and figure out what they can do to get the Trump administration to unwind these tariffs. And if indeed the Trump team is successful in concluding some high-quality agreements with a number of countries, particularly in Asia, I think that can give some momentum to a world where the United States is still linked with the other countries. But again, I think long-term damage has already been done and the world we live in going forward, it's not gonna be a US centered world on the economic front.

Stan McCoy: How do you rate the chances of success in this 90 day or rush to negotiate?

Wendy Cutler: I don't rule out. It depends how you measure success. But let's just say if success is, agreements announced between five countries, important countries? In principle, I think that could be viewed as success if it is accompanied by extending the 90-day negotiating period for others, particularly those that have been negotiating in good faith, but for whatever reason, we've been unable to close a deal.

But I would also just caution if the Trump administration puts too many issues on the table that need to be solved during these 90 days, that's gonna just make it so difficult for our trading partners. Because let's remember 90 days in the trade negotiating world, and both of you know it better than I do, that's just a drop in the bucket.

Typically, it would take the United States six months just to come up with our positions for negotiations, working with stakeholders, Congress, and our inter-agency teams. And the notion now that we're gonna just put it all on the table and wrap this all up in such a short period of time.

It's a little mind boggling for me. I think it's, I think it's an enormous challenge and it suggests to me that maybe some of these agreements, if indeed they're reached, that the bark is worse than the bite, that they're not gonna be as invasive or intrusive as some of our trading partners currently fear.

But that's being an optimist.

Stan McCoy: Yeah. But I think you have to be an optimist. You have to. There's gotta be some, there's gotta be some way to rapidly pivot back to a more peaceful and stable architecture here. I don't think we can live in a condition of permanent trade war. At least I hope we don't. The final question I always ask on this podcast is this is indeed a trade war that we're in, who started it? Did President Trump start the trade war on April 2nd? Did he start it on January 20th? Or did the real roots of this conflict lie somewhere deeper than that? I'd be very interested in your insights on that, starting with you Minister Yeo.

Yeo Han-koo: I think that's a difficult question, but I think thatit really surfaced eight years ago with the advent of Trump 1.0 I vividly remember that at that time it was really big shift, from this previous rule-based, international order towards this sort of Trumpian way of trade.

And actually that was where the first time when this national security issue began to conflate it into the trade and economic issues. But obviously, it's deeper than that. All these grievances from globalization and the free trade agreement and those left behind weren't really addressed in many of these developed countries.

Stan McCoy: Wendy, you get the last word. Who started the war?

Wendy Cutler: Again, it is a complicated question, but the concern about international trade in the United States. Those concerns have been building for a long period of time. I left USTR in 2015 and even then, you could sense that things were changing and frankly we had just concluded the TPP negotiations and while we felt like we got a good deal, none of us were under any illusion that this was gonna be an extremely tough agreement to get through Congress. And, it never ended up being submitted to Congress. And of course President Trump exited from the agreement. So again, I think this was building up for a long period of time.

I think it always takes two to tango in a trade war.

And sometimes I look at, there's retaliation and there's counter retaliation, there's counter retaliation. At some point we need to just stop that and figure out is this really in our interest where we are? And I was somewhat encouraged by a report the past few hours that the Treasury Secretary did say that he expects a deescalation in tensions between the United States and China.

In the near future. Maybe we can conclude on that note, which is also somewhat optimistic as well.

Stan McCoy: That is a good optimistic note to conclude on. For what it's worth, I think the war started in 1999 in Seattle and with the war against globalization that what we see in the Trump administration's trade policies, the culmination of a war on globalization that that.

That started back then and has been fed in different ways by the growth of China's economy. Its influence, the way it behaves towards the rest of its trading partners but also ultimately taken over and made a political weapon by the current US administration. But. That's just one person's opinion. I have to say big thanks to both of you for being on. Any final remarks from you Minister Yeo, or from you, Wendy?

Wendy Cutler: Thanks for having us.

Yeo Han-koo: Yeah. Really fascinating discussion. I really enjoyed it. Thank you.

Stan McCoy: I'm really happy that you were both able to join us and give us some insight on the challenges that are playing out across the Asia Pacific region. Now. I feel like we have a much better window into what those trading partners are having to wrestle with right now. So, thanks very much for joining us for this episode of the Trade War Podcast.