The Korea-U.S. fact sheet and what it means for tariffs, troops and submarines

[EXPLAINER]

In a surprise press conference on November 14, President Lee Jae Myung announced that South Korea and the United States concluded a rather delayed joint fact sheet covering the terms agreed upon during his summit with U.S. President Donald Trump for both bilateral trade and security.

“The joint fact sheet, an explanatory document containing the agreements reached between the two Korea-U. S. summits, has been finalized,” Lee said in the televised briefing at the Yongsan presidential office in central Seoul. “With this, Korea-U. S. trade negotiations and security consultations, which have been one of the most crucial variables affecting our economy and security, have finally been concluded.”

The fact sheet release comes over two weeks after the second summit between Lee and Trump on Oct. 29 in Gyeongju, North Gyeongsang, on the margins of the APEC summit, where the two leaders indicated that the bilateral trade deal had been “finalized.”

The comprehensive fact sheet outlines the outcome of the two leaders’ summit talks, covering the specifics of the trade deal, sensitive security matters and approach to North Korea. The two sides agreed to “further their maritime and nuclear partnership,” and the fact sheet included Seoul’s request on sourcing fuel supplies for nuclear-powered submarines, which has been a source of contention for the two countries in the negotiation process.

Lee stressed that the “meaningful outcome of this negotiation is due above all to U.S. President Trump’s rational decision-making.”

He added that through the joint fact sheet, the “door to a renaissance of the Korea-U.S. alliance is wide open.”

Why was there a delay in releasing the joint fact sheet?

The two countries reached a tentative agreement in late July where the United States agreed to lower its tariffs on Korean goods to 15 percent from 25 percent in return for Seoul’s $350 billion investment pledge, which led to the first summit between Lee and Trump in late August in Washington. The two sides, however, were deadlocked on the financing of this investment fund, as Seoul was worried that the Trump administration’s demand for upfront payment for the pledged amount would cripple the Korean economy.

Trump, ahead of a dinner with other APEC leaders following his second summit with Lee on Oct. 29, announced that the trade deal had been “finalized,” which was also confirmed by the presidential office shortly after.

Lee during his summit with Trump also asked for Washington to support Seoul’s push to secure fuel supplies for nuclear-powered submarines, meaning the construction would be in Korea. However, Trump later said he would like to see nuclear submarines build in Hanwha Philly Shipyard in Pennsylvania.

And Lee in Friday’s press conference some 16 days later said that the two sides had been negotiating the nitty-gritty details, noting “because this is a critical issue that could determine the fate of Korea, we could not afford to neglect even a single word or issue,” adding some “coordination within the U.S. government was needed on issues like uranium enrichment, nuclear reprocessing and nuclear-powered submarines.”

Lee said regarding the long time it took to reach the joint document. “In a situation where we had to engage in an involuntary negotiation of sorts to minimize losses due to the reorganization of the international order at the request of the other party, our greatest weapon was to endure.”

Was Seoul granted the ability to secure fuel supplies for nuclear-powered submarines?

The fact sheet stated that the United States gave approval for Korea to build nuclear-powered attack submarines, adding that it will work closely to advance requirements for the shipbuilding project, including “avenues to source fuel.”

They also agreed to further collaborate, through a shipbuilding working group, on areas including maintenance, repair and overhaul, work force development, shipyard modernization and supply chain resilience.

Washington lauded Seoul’s commitment to contribute to modernizing and expanding the capacity of the American shipbuilding industry, including through investments in U.S. shipyards and its workforce. In turn, Seoul welcomed Washington’s support for Korea’s civil and naval nuclear power programs.

The United States further said it supports the process that will lead to Korea’s civil uranium enrichment and spent fuel reprocessing for peaceful uses, in keeping with the “123 agreement,” which is a bilateral civil nuclear energy pact that bans Seoul from uranium enrichment and reprocessing spent nuclear fuel.

“Through these negotiations, Seoul and the United States agreed to pursue the construction of nuclear-powered submarines, a decades-old dream for our country and a vital strategic asset for peace and stability on the Korean Peninsula,” Lee told reporters on November 14. “We also succeeded in securing U.S. government support to enable uranium enrichment and the reprocessing of spent nuclear fuel. This is considered a very significant step forward.”

The initiative also leaves open the “potential construction of U.S. vessels in the ROK,” referring to the acronym for the South’s official name, the Republic of Korea.

National Security Adviser Wi Sung-lac said in a follow-up briefing that while security matters were agreed upon in the first Korea-U.S. summit in August, matters of uranium enrichment and spent fuel reprocessing, also linked to the revision of the bilateral nuclear energy pact, were particularly contentious issues that required “coordination of opinions until the very last minute.”

As Seoul will still need to figure out the specifics through further negotiations, Wi said that it has been looking to Aukus, the trilateral security partnership between Australia, the United Kingdom and the United States for needed adjustments.

Wi also clarified confusion regarding location and said that discussions were “always on the premise that construction of the submarines would take place in South Korea.”

He also drew a clear line and said, “Even if we receive nuclear fuel from the United States and use it in conventional military submarines, it is not nuclear armament,” noting that the intent of having nuclear-powered submarines is fundamentally to deter North Korea.

He stressed that Seoul being granted “authority to enrich and reprocess spent nuclear fuel for the operation of nuclear-powered submarines has nothing to do with nuclear armament.”

What does the final trade deal entail?

Industry Minister Kim Jung-kwan and U.S. Commerce Secretary Howard Lutnick after weeks of negotiations electronically signed a memorandum of understanding (MOU) on November 14.

Regarding the strategic trade and investment deal reached in late July, the leaders welcomed Korean investments in various sectors to advance economic and national security interests, including shipbuilding, energy, semiconductors, pharmaceuticals, critical minerals and AI and quantum computing.

The deal includes $150 billion of Korean investment in the shipbuilding sector, which is referred to as approved investments. This deal also includes an additional $200 billion of committed Korean investment, pursuant to the memorandum of understanding with respect to strategic investments (MOU), to be signed by representatives of the two countries.

The document said that the United States will apply the higher of either the Korea-U. S. FTA or the U.S.’s “most favored nation” tariff rate, as applicable, or a tariff rate of 15 percent on goods originating in Korea.

The United States will reduce its Section 232 sectoral tariffs on Korea’s automobiles, auto parts, timber, lumber and wood derivatives to 15 percent. Likewise, tariffs on pharmaceuticals will be no greater than 15 percent.

For tariffs imposed on semiconductors and chip manufacturing equipment, Washington intends to provide terms “that are no less favorable than terms that may be offered in a future agreement covering a volume of semiconductor trade at least as large as Korea’s, as determined by the United States.”

Wasn’t Seoul concerned about the repercussions on its financial markets if it were to pay the full amount upfront as originally requested by the Trump administration?

As announced after the Lee-Trump summit on Oct. 29, the fact sheet stated that the two sides agreed that the Korea will not be required to fund an aggregate amount of U.S. dollars greater than $20 billion annually.

The two leaders “thoroughly discussed the potential impact of the MOU on the foreign exchange market stability” of Korea and reached a mutual understanding that commitments shouldn’t give rise to market instability.

It added that Korea will put its best efforts forward to source the U.S. dollars through “means other than market purchases so as to minimize any potential impact on the market.” Should such commitments cause market instability, Seoul may “request an adjustment in the amount and timing of the funding, and the United States will, in good faith, give due consideration.”

What was said about North Korea?

Through their summit, the two leaders committed to peace, security and prosperity on the Korean Peninsula and in the Indo-Pacific region.

They reiterated they stood by the “complete denuclearization” of North Korea and pledged to work together to implement the joint statement reached in the first summit between North Korean leader Kim Jong-un and Trump in Singapore in 2018.

Both leaders agreed to coordinate closely on North Korea policy and called on Pyongyang to return to “meaningful dialogue and abide by its international obligations,” including abandoning its weapons of mass destruction and ballistic missile programs.

Will there be any changes to the U.S. troops stationed in Korea?

In the press conference, Lee said that Washington reaffirmed the continued stationing of the U.S. Forces Korea (USFK) and its “firm commitment to extended deterrence.”

This comes as Washington has been signaling it would like to see a more flexible role for the USFK in the region.

Lee also said that Seoul made clear its intent to take the lead in the defense of the Korean Peninsula through strengthening its defense capabilities and the transfer of wartime operational control, or Opcon, to South Korea and that Washington strongly expressed its willingness to assist such efforts.

The fact sheet noted that Seoul committed to spending $25 billion on U.S. military equipment purchases by 2030 and shared a plan to provide comprehensive support for USFK amounting to $33 billion. Lee also shared Seoul’s plan to increase its defense spending to 3.5 percent of GDP.

Wi said the $33 billion figure includes direct and indirect costs for the USFK, including land and took into consideration the existing bilateral Special Measures Agreement.

However, a joint communique between Defense Minister Ahn Gyu-back and Defense Secretary Pete Hegseth, who visited Seoul last week, has left out language in which Washington commits to maintaining the current 28,500-strong USFK, which could leave open the possibility of a troop drawdown in the future.

Did the fact sheet address China’s rising assertiveness in the region?

The fact sheet “emphasized the importance of preserving peace and stability across the Taiwan Strait” and “opposed unilateral changes to the status quo” in the area, without directly referring to China by name. Lee and Trump also committed to strengthen the trilateral partnership with Japan.

Likewise, the summit-level agreement in which South Korea and the United States agreed to pursue domestic construction of U.S. warships could be interpreted as Seoul joining Washington in strengthening its naval power to counter Beijing’s growing maritime assertiveness.

Seemingly aware of such optics, during the press conference Lee said, “It is foolish to baselessly reject others just because they have different positions or ideas amid this harsh international order. The United States, while engaged in conflict and confrontation with China on a wide range of fronts, also cooperates where cooperation is necessary. What we need now is precisely this pragmatic approach.”

He noted that through dialogue with China, his government will “steadfastly continue on the path toward developing bilateral relations and peace on the Korean Peninsula.”

BY SARAH KIM [kim.sarah@joongang.co.kr]