Tariff Talks? A Round Trip to the Airport.

• Gu Yoon-chul (Minister of Strategy and Finance) went through departure procedures at Incheon Airport but canceled and returned. Scott Besant (U.S. Secretary of the Treasury) suddenly informed him of a delay. Not by phone, but by email.
• For now, Kim Jeong-gwan (Minister of Trade, Industry and Energy) and Howard Lutnick (U.S. Secretary of Commerce) are set to meet.
• Wi Sung-rak (Director of National Security) returned empty-handed.
• The Ministry of Strategy and Finance explained it was due to Scott Besant’s urgent schedule. They didn’t hear what this ‘urgent schedule’ was, but it’s likely the U.S. prioritized negotiations with the EU over Korea.
• The Wall Street Journal reported that an agreement between the U.S. and Europe is imminent. The Financial Times also reported a likely agreement on a 15% universal tariff.
• Besant is set to negotiate with China in Sweden on the 28th-29th. If negotiations with Korea aren’t concluded by August 1, a 25% tariff will be imposed.
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What Matters Now.

$100 Billion? Blocked at the Entrance.

• A government official remarked, “It seems like a message that what Korea has offered so far isn’t enough.”
• A trade expert interviewed by Chosun Ilbo said, “It’s like being blocked at the entrance before even presenting the negotiation plan.”
• Jang Sang-sik (Director of the International Trade and Commerce Institute at the Korea International Trade Association) stated, “We can’t propose ‘investment figures’ like Japan, but to receive tariff rates similar to Japan, we’ll inevitably have to present non-tariff barriers and sensitive items.”
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What Will You Give for a 1% Cut?

• This is Donald Trump’s (U.S. President) art of negotiation. A photo from the U.S.-Japan negotiation room released by the White House shows a printed panel stating an investment of $400 billion, which was crossed out with a pen and changed to $500 billion.
• It was spontaneously increased, adding $50 billion more than what was noted in the memo. He reportedly said, “Alright, let’s go with this,” extending his hand for a handshake.
• Trump pushed relentlessly for 70 minutes. With each 1% point reduction, he kept pressing with demands like “Buy more rice” and “Buy more aircraft.” Eventually, Japan agreed to increase rice imports from 350,000 tons to 600,000 tons and exempt U.S. cars from safety inspections, meeting many of the U.S. demands. The Japanese negotiation team remarked, “It felt like we needed at least 10 people to withstand the pressure.”
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Is Japan Being Played?

• Howard Lutnick said this: “Trump can choose the project. If he says, ‘Let’s make antibiotics in the U.S.’ and ‘Let’s invest $15 billion,’ Japan funds it. The U.S. doesn’t pay. 90% of the profits go to American taxpayers, and Japan gets only 10%. That’s all there is to it.”
• When asked if that’s possible, he replied, “If we give the project to Japan, they pay. If not, tariffs go up the next day. It’s really simple.”
• The Asahi Shimbun pointed out, “It’s no different from Japanese funds being used for the reconstruction of the American economy.”
• Bloomberg News noted, “It could have a negative long-term impact on the Japanese economy.” Meanwhile, Japan’s government bond yields hit a 17-year record. Many speculate it’s due to concerns about Japan’s worsening finances.
• Pressure is mounting for Shigeru Ishiba (Prime Minister of Japan) to resign.
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Deferred with Promises of the Future.

• Japan’s $550 billion investment plan is riddled with ambiguities. Tariffs were lowered immediately, yet the $550 billion lacks a deadline.
• If the Japanese government only partially invests and adds guarantees and loans, the burden might significantly decrease. They’ve bought time and hold a card that could reverse the situation. Those holding the money might shape a favorable scenario.

Japan’s 15% Auto Tariff: What About Korea?

• Japanese car companies are relieved. When asked by the New York Times, Toyota and Honda had no comment, while Nissan said they were “encouraged.” A 15% tariff seems manageable. All three companies saw their stock prices soar.
• On the other hand, American car companies are unhappy. GM and Ford produce over 2 million cars and trucks in Canada and Mexico, but face a 25% tariff when bringing them into the U.S.
• Matt Blunt (President of the American Automotive Policy Council) stated, “It’s unfair to negotiate lower tariffs on Japanese imports with almost no American parts than on Canadian or Mexican cars with many American parts.”
• Trump emphasized, “We can now sell American cars to Japan,” but this is almost meaningless. Japan prefers different models and right-hand drive, so there’s virtually no market. Anyway, American cars can already be exported to Japan with a 0% tariff.
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Hyundai’s Q2 Operating Profit Drops 16%.

• Last year’s Q2 was 4.3 trillion won, but this year’s is expected to be just 3.6 trillion won.
• The impact of tariff shocks is significant. A 25% tariff has been applied since April, yet prices haven’t been raised. Q2 sales increased by 0.8%, but margins have significantly decreased.
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Japan’s $550 Billion vs. Korea?

• The Korean government planned to propose an investment of $100 billion, but Trump’s expectations are likely much higher.
• According to the Dong-A Ilbo, there was speculation about proposing $200 billion, combining corporate investment and government guarantees, but it still falls short of Japan’s scale.
• Howard Lutnick also said this: “Korea is eager to negotiate too. When Koreans see the U.S.-Japan deal, expletives must have flown. Korea and Japan are wary of each other.”
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Defense Cost Sharing Surplus: 2 Trillion Won Unused.

• Unspent in-kind support amounts to 1.9151 trillion won. Add unspent cash of $181 million (about 248.6 billion won), and it totals 2.1637 trillion won.
• That’s more than next year’s contribution of 1.5192 trillion won.
• Switching from a total amount model to a usage-based model is also being discussed. Pay as you go, they say.
• There’s also a proposal to increase defense spending to 3% of GDP within four years. Trump insists on raising it to 5%. NATO countries have already aligned at 5% with 3.5% for defense and 1.5% for indirect investment.
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What Card Will Korea Play?

• Korea is in a situation similar to Japan’s in early May. Negotiations haven’t even started yet. Various media outlets are offering advice, but no clear solution is in sight.
• Lowering the general tariff to 15% would be a success, but auto tariffs should match Japan’s level. The red lines on rice and beef must be maintained. The investment fund size could be increased from $200 billion. Emphasizing security cooperation is an option, and good packaging is crucial. Cooperation in manufacturing sectors like semiconductors and shipbuilding could be an attractive card for Trump.
• The Hankyoreh editorial emphasized, “In times like these, negotiations must be persistent and tenacious.”
• The JoongAng Ilbo editorial warned, “Trying to protect everything might lead to losing everything,” stressing that “a strategy covering all scenarios is necessary to protect ourselves.” Conservative newspapers argue that even if some concessions on agriculture are made, the industry must be protected.
• The Kyunghyang Shinmun pointed out, “This opportunity should be used to reduce dependence on the U.S. and to establish a robust economic security strategy by strengthening alliances among free trade nations.”
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Deep Dive.

Expanding the Game to Cover Epstein?

• Trump is currently preoccupied with the Epstein files. The Wall Street Journal reported that Trump’s name appears in the Epstein files. The context of Trump’s involvement is yet to be confirmed.
• The Epstein files refer to the investigation records of billionaire Jeffrey Epstein. He was arrested and charged with crimes including the exploitation of minors, and later committed suicide in prison. Trump had promised to release the Epstein files if elected during last year’s presidential race but has since changed his stance.
• Even within the MAGA camp, dissatisfaction is brewing. They spread conspiracy theories claiming the files would include a large number of left-wing pedophile elites, but now suspicions are mounting that Trump himself might be in those files. Some predict it could become the biggest hurdle in the midterm elections.
• Steve Bannon (founder of Breitbart News) warned, “If just 10% of the supporters defect, the Republicans could lose 40 seats in the midterm elections.” (Out of 435 House seats, Republicans hold 220 seats.)
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Q2 Growth Rate at 0.6%.

• The private sector led the way. Semiconductor exports revived.
• Exports remain the key variable in the second half. Uncertainty abounds.

Another Take.

Both Park Chan-dae and Jung Cheong-rae Knew About Kang Sun-woo’s Resignation.

• Park Chan-dae (Democratic Party lawmaker) knew Kang Sun-woo (then Minister of Gender Equality and Family nominee) would resign, yet he posted that she should make the decision herself. Jung Cheong-rae (Democratic Party lawmaker) insisted on pushing through with the appointment until the end.
• The two have subtly diverging stances. Park claims his statement was to ease the president’s burden. Kyunghyang Shinmun sees it as Park’s attempt at a ‘show’ to emphasize ‘loyalty.’ Jung is wary of the perception that ‘loyalty’ lies with Park.
• A lawmaker close to Jung remarked, “Using Kang Sun-woo as a stepping stone to package this as loyalty,” adding, “Do party members not see through such intentions?”
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Worker Tied to Forklift.

• “I couldn’t believe my eyes after watching the video.” This is what Lee Jae-myung (President) wrote on Facebook.
• A video surfaced showing a Sri Lankan migrant worker being tied to a forklift and lifted. A man, presumed to be Korean, is seen berating him, saying, “Did you do something wrong?” and “You should say you did something wrong.”
• Lee Jae-myung pointed out that it was “an intolerable act of violence against minorities and the weak, and a clear violation of human rights.”
• The video was released by the Migrant Workers’ Network. The Dong-A Ilbo met with the worker, who said, “It was truly humiliating.” The abuse reportedly lasted for 30 minutes.
• The Ministry of Employment and Labor has launched an investigation. Kim Young-hoon (Minister of Employment and Labor) remarked that it is “a serious crime that cannot be overlooked.”
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Company Beats Workers, Police Just Watch.

• It’s happening at Hyundai Motor’s Ulsan plant.
• Hyundai managed workers by closing and reopening subcontractors every 2-3 years. Isu Enterprise, a subcontractor formed after Mujin Enterprise closed, fired all employees after they won a lawsuit over illegal dispatch.
• When the union set up tents, security staff forcibly removed them, injuring many.
• At a parliamentary forum, a worker remarked, “I wondered if this country is a rule-of-law state. Managers and agents beat us without guilt, police looked away, is this the power of conglomerates?”
• Yoo Tae-young (lawyer, Minbyun Labor Committee) explained, “Hyundai’s unprecedented mass firing aims to threaten workers in retrial and erase evidence of illegal dispatch, hindering lawsuits.”
• Yoon Jong-oh (Progressive Party lawmaker) vowed, “I will strive to hold those responsible accountable.”
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Break the Cycle of Policy Audits.

• “Whenever the government changes, even rational and necessary administrative actions often become targets of excessive policy audits and investigations. This has led to a passive or inactive public service, and we must break this vicious cycle.” This is what Lee Jae-myung said at the chief and aides meeting.
• Policy audits, introduced in 2003, have been criticized for encouraging inaction with every regime change.
• While strictly addressing corruption and human rights violations by public officials, we decided to be cautious with targeted audits or investigations of power abuse against the previous government.
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Endless Cycle of Heatwaves and Downpours: A Warning from the ‘Swing’ Climate.

• When the temperature rises by 1 degree, the water vapor capacity increases by 7%.
• The repeated cycle of droughts, floods, heatwaves, and downpours is called the ‘Wet-Dry-Swing’ phenomenon. There’s a forecast that Seoul’s temperature will hit 38 degrees this weekend.
• Kim Hyung-jun (Professor at KAIST) warned, “Changes made by humans are returning as weather anomalies.” According to MetaEarth Lab, which analyzes climate simulations using big data, 1% monster downpours occur five times more frequently compared to a scenario without humans on Earth.
• The chilling warning is that if we exceed the 1.5-degree target and reach 2 degrees, the intensity of the swing phenomenon could increase up to tenfold.
• Kim Hyung-jun proposed creating a “Korean Loss and Damage Fund (FRLD).” This fund is meant to support losses and damages in developing countries. The proposal suggests that even at the national level, areas with high greenhouse gas emissions should share the costs. It implies that Korea needs to institutionalize the principle of ‘Common But Differentiated Responsibilities (CBDR).’
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Climate Crisis Response: A Duty for All Nations.

• The UN International Court of Justice (ICJ) issued an ‘advisory opinion’ unanimously from 15 judges.
• It stated that addressing the climate crisis requires ‘due diligence’ from all nations and an obligation to use all possible means, emphasizing the legal duty to restore and fully compensate countries harmed by unjust acts.
• The ICJ’s ‘advisory opinion’ is not a mere suggestion but an authoritative statement that all nations must consider in legal judgments.
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LG Chem’s Direct Power Purchase.

• They decided to buy electricity directly from the power exchange, bypassing Korea Electric Power Corporation.
• Industrial electricity rates soared from 108.1 won/kWh in Q1 2022 to 182.8 won/kWh in Q1, a 70% surge over three years.
• They judged that the direct purchase price, which includes the wholesale market price (SMP) plus network usage fees, is cheaper. Maeil Business Newspaper analyzed, “If large corporate clients continue to leave, KEPCO’s financial structure could worsen further.”
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North Korea Halts Jamming Signals.

• In response to South Korea halting radio and TV broadcasts to the North for the first time in 52 years.
• Broadcasts like ‘Voice of the People,’ ‘Echo of Hope,’ and ‘Free Korea Broadcasting’ were sent to the North but ceased after the Lee Jae-myung administration took office.
• North Korea had already stopped its broadcasts to the South, such as ‘Echo of Unification’ and ‘Pyongyang Broadcasting,’ in January last year.
• The Kyunghyang Shinmun editorial emphasized, “We need to rebuild trust step by step,” and stressed, “Peace on the Korean Peninsula can only be achieved through peaceful means.”
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ICYMI.

The Shift from Jeonse to Monthly Rent Accelerates.

• Chosun Ilbo analyzed rental transactions for the first half of this year. Out of 1.46 million cases, 900,000 were monthly rentals.
• In 2020, the jeonse to monthly rent ratio was 59% to 41%, but it has reversed to 38% to 62%.
• The shift from jeonse to monthly rent has accelerated as gap investments decreased following loan regulations.
• Park Won-gap (KB Kookmin Bank Senior Advisor) stated, “If the shift from jeonse to monthly rent continues at this pace, the housing cost burden on non-homeowners could significantly increase,” adding, “Measures to expand the supply of both public rental housing and monthly rentals must be supported.”
• Related Link.

18.9% of Youth Unemployed for Over 3 Years.

• It’s a record high. There are 1.21 million unemployed youths, with 230,000 out of work for over three years.
• Among those whose first job is a wage-earning position, 9.9% take over three years to find employment.

SK Hynix Q2 Operating Profit Hits 9.2 Trillion Won.

• It’s a record high. In comparison, Samsung Electronics’ semiconductor division posted an operating profit of 0.4 trillion won.
• Demand for HBM (High Bandwidth Memory) is steadily increasing. The outlook for the second half is also positive.

“Not a Penny” Yet Yoon’s Wealth Hits 8 Billion Won.

• “He went in without a penny and couldn’t buy anything,” said Kim Gye-ri (lawyer).
• The Public Officials Ethics Committee disclosed the assets of 54 high-ranking officials, with Yoon Seok-yeol (former president) topping the list. Real estate appraisal values rose, increasing his wealth by 500 million won since last year.
• Yoon’s assets include only 600 million won in cash; the rest is under Kim Keon-hee’s (wife) name.
• Second is Choi Sang-mok (former Minister of Strategy and Finance) with 4.5 billion won, followed by Hong Joon-pyo (former Daegu Mayor) with 4.3 billion won.
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Choi Dong-seok Calls Democratic Party a “Gang of Thugs”.

• Choi Dong-seok (Head of the Personnel Innovation Department) never runs out of words. He labeled the Democratic Party as a “gang of thugs whose words and actions don’t match,” and wrote that “old men with no appealing vision, strategy, or ability are stirring up the political scene,” adding, “It’s time to judge them all.”
• Last year on a YouTube broadcast, he claimed, “Cho Kuk will be a stumbling block for Lee Jae-myung and the Democratic Party.”
• When asked about the Kang Sun-woo power abuse controversy, he replied, “I don’t watch TV or read newspapers.”
• Kim Jeong-ha (JoongAng Ilbo Editorial Writer) described him as a “pro-Moon, pro-Lee fighter,” and evaluated him as an ideologue providing necessary logic and justification for Lee Jae-myung and his supporters.
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Han Dong-hoon Won’t Run for Party Leader.

• He might have decided it’s hard to win against the pro-Yoon faction. “If reactionary forces form a far-right scrum, we must advance by creating a coalition of hopeful reform,” he said.
• Kim Moon-soo (former Minister of Employment and Labor) has emerged as a strong candidate for party leader. In the pro-Yoon camp, Ahn Cheol-soo (People Power Party lawmaker) is likely to gain support.

Sauna in Yoon’s Office.

• They converted the existing shower room into a sauna. It’s a dry sauna made of cypress wood.
• An interior company quoted 45 million won, but Kim Yong-hyun (then Chief of Security) reportedly offered 30 million won in cash for a discount. The company refused, citing tax evasion as illegal, and the job was given to another company through 21gram.
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Yoon Suk-yeol’s Twice-a-Day Lawyer Visits.

• There’s air conditioning in the meeting room. Despite refusing investigations and trials, he meets his lawyer an average of 2.3 times a day.
• Lawyer meetings occur in a separate space without partitions and without a guard present. There are no limits on time or frequency. It’s a right guaranteed by the Constitution.
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Presidential Press Corps Adds News Factory and Accusation News.

• The decision to admit new members to the press corps is usually made by the reporters themselves, but this time, the presidential office decided and informed them.
• All three, including Convenience Store, are considered YouTube channels with Democratic Party leanings.

Worth Reading.

Prosecutorial Reform and Unchecked Corruption.

• What happened when the prosecution, which opposed the complete removal of its investigative powers, took power? Ha Tae-hoon (Professor at Korea University) described it as ‘allowing corruption to run rampant.’
• With the change in administration and attempts to complete unfinished prosecutorial reforms, concerns about the side effects of removing prosecutorial powers are rising again. Ha Tae-hoon pointed out, “A bent sword cannot be used again,” adding, “History shows that even if you straighten a bent sword, it bends again.”
• Principles must be firmly established. Ha Tae-hoon emphasized, “The Serious Crimes Investigation Agency, the Prosecution Agency, the existing National Investigation Headquarters, and the Corruption Investigation Office for High-ranking Officials should be in a cooperative relationship towards a single goal, as they are subject to judicial review in both investigation and prosecution.”
• Related Link.

Lee Jae-yong’s Acquittal: It’s Not Over Until It’s Over.

• The illegal succession trial of Lee Jae-yong (Samsung Electronics Chairman) concluded with an acquittal. It’s the end of a 30-year saga.
• Jeon Byeong-yeok (Kyunghyang Shinmun Economic Editor) remarked, “Lee Jae-yong will go down in history as a winner who achieved maximum effect with minimal cost.”
• The phrase “it’s not over until it’s over” persists because the governance structure of Lee Jae-yong-Samsung C&T-Samsung Life-Samsung Electronics remains fragile. If the Insurance Business Act amendment passes, the link between Samsung Life and Samsung Electronics could be severed immediately, significantly weakening management control. The separation of finance and industry is also a longstanding issue in the Korean economy.
• Jeon Byeong-yeok analyzed, “We must watch closely to see if the Lee Jae-myung practical government will find any pragmatic solutions or shortcuts to untangle Samsung’s complex issues.”
• Related Link.

Only Lee Jae-myung Stands Out.

• For 50 days, the ‘workaholic’ president’s attention to detail shone through.
• Lee Choong-jae (former editor-in-chief of Hankook Ilbo) remarked, “Pragmatism is a means to achieve goals, not an end in itself,” warning, “Focusing too much on immediate results can make you miss the big picture.”
• The current situation, where everyone waits for the president’s orders, is dangerous. Few subordinates dare to speak up in front of a boss who wishes a day had 30 hours.
• In a press conference a month after taking office, Lee Jae-myung once said, “Once the public sector stabilizes, the captain doesn’t need to constantly direct the navigator.” He knows that the president micromanaging everything is not ideal. Lee Choong-jae stressed, “Now is the time for a vision and strategy for the ‘real Korea’,” adding, “A truly competent leader is one who clearly sets the problem and trusts their staff to handle it.”
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