Saturday, July 26, 2025

Navigating Tariff Talks: South Korea’s Strategic Leveraging of Shipbuilding in US Negotiations

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Shipbuilding is a Leverage Point in South Korea’s Trump Tariff Negotiations

South Korea and the United States have been engaging in discussions centered around a potential partnership in the shipbuilding industry, which could entail investments to modernize U.S. shipyards and enhanced support for repairing the U.S. naval fleet. This initiative comes as South Korea seeks to gain more favorable tariff terms during ongoing negotiations.

U.S. President Donald Trump has consistently emphasized the importance of revitalizing the aging U.S. shipbuilding industry, a move aimed at keeping pace with China. China, having made substantial investments in its shipbuilding capacity, currently holds the title of the world’s largest shipbuilder. It also boasts the world’s most extensive maritime fighting force, with 234 warships compared to the U.S. Navy’s 219.

Kim Suk Kyoon, a former commissioner of the Korea Coast Guard and a maritime strategy expert, suggests that South Korea could leverage its shipbuilding capabilities to gain advantages in the tariff negotiations. This pressure has intensified following Japan’s recent trade agreement with the U.S., putting added urgency on South Korea’s ongoing trade talks in Washington.

Globally recognized as the second-largest shipbuilder, a source with direct knowledge of the discussions indicated that any potential partnership should involve South Korean companies investing in the U.S., along with increased contributions in repair and maintenance activities.

Political Will and Existing Collaborations

The proposal of a “Korea-U.S. manufacturing renaissance partnership,” particularly in shipbuilding, has garnered significant interest from the United States. The ongoing dialogue is seen as a collaborative effort to counter China’s growing influence in the shipbuilding sector. Despite this, U.S. authorities have yet to publicly comment on the progress of these talks.

For South Korea, the most pragmatic approach might involve agreements to undertake a fixed number of U.S. Navy vessel repairs annually or to contribute components for new ships. This strategy is already partially in place, with repairs on U.S. Navy ships occurring in South Korea, such as at Hanwha Ocean’s Geoje shipyard. This location boasts the world’s largest dock and a prominent 900-ton “Goliath” crane.

Hanwha Ocean has secured its third U.S. Navy maintenance contract as of July, and its parent company, Hanwha Group, is making inroads in the U.S. shipbuilding landscape. Hanwha Group’s acquisition of the Philly Shipyard exemplifies this expansion, and they are set to collaborate on constructing a liquefied natural gas carrier between the Philly Shipyard and the Geoje shipyard.

Additionally, Hanwha Group is augmenting its presence by increasing its stake in the Australian shipbuilder Austal, which operates a shipyard in Alabama that builds U.S. Navy ships. Parallel to this, another major South Korean shipbuilder, HD Hyundai, has aligned with Huntington Ingalls, a U.S. defense-focused shipbuilder, and joined forces with Edison Chouest Offshore for U.S.-based container ship construction.

Challenges and Future Prospects

Despite these advances, challenges remain in broadening the relationship between South Korean and U.S. shipbuilding. These include difficulties in sourcing parts and a dearth of skilled local workforce at U.S. shipyards. Political will is also crucial, considering the strict U.S. regulations aimed at protecting domestic shipbuilding efforts.

A South Korean trade official highlighted the need for exceptions or adjustments to current legislation such as the Jones Act, which restricts foreign-built commercial ships operating within the U.S. and the Byrnes-Tollefson Amendment, which prohibits navy vessel construction in foreign shipyards. However, the president does have the authority to waive these provisions for national security concerns.

To navigate U.S. regulations, South Korea could consider alternatives like producing ship modules for delivery to U.S. shipyards or designating a South Korean shipyard as a special district for U.S. Navy contracts.

Past Influences and Strategic Outlook

Trump’s connection to South Korean shipbuilding dates back almost three decades. A significant event during his business career was a visit to the Geoje shipyard in 1998. There, he was reportedly impressed by the vast shipyard when viewed from atop a towering crane.

This early interaction may have left a lasting favorable impression, making Trump, now as president, more open to collaborations with South Korean shipbuilders. Such partnerships could effectively serve as a countermeasure to China’s rising naval powers.

In summary, South Korea sees its advanced shipbuilding sector as a potent tool in negotiating tariffs with the United States, providing mutual benefits in strengthening respective industries and strategic capabilities.

Natalie Kimura
Natalie Kimurahttps://www.businessorbital.com/
Natalie Kimura is a business correspondent known for her in-depth interviews and feature articles. With a background in International Business and a passion for global economic affairs, Natalie has traveled extensively, providing her with a unique perspective on international trade and global market dynamics. She started her career in Tokyo, contributing to various financial journals, and later moved to London to expand her expertise in European markets. Natalie's expertise lies in international trade agreements, foreign investment patterns, and economic policy analysis.

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