Trump Car Tariffs Threaten Korea Military Ties, Moon Ally Warns

(Bloomberg) -- President Donald Trump is undermining America’s diplomatic and military ties with South Korea -- not just its economic relationship -- by threatening to impose auto tariffs, according to a senior lawmaker in Seoul.

Hong Young-pyo, the ruling Democratic Party’s leader on the floor of the National Assembly, is among many South Korean politicians in voicing anger and dismay that the Trump administration could impose new tariffs after Korea renegotiated its trade deal with the U.S. earlier this year.

Trump Car Tariffs Threaten Korea Military Ties, Moon Ally Warns

“This would bring a dramatic change in the environment for trade, foreign policy and security with American allies, including Japan, the EU and South Korea,” Hong, 61, said in an interview on Nov. 19. “It would certainly be a shock and have a long-term impact on global markets and diplomatic relations with key allies.”

While Trump and his South Korean counterpart Moon Jae-in signed the updated agreement in September, the legislature in Seoul is unlikely to ratify it without an understanding that the nation’s carmakers won’t get hit, according to Hong. That could mean waiting until February, when the Commerce Department will have a complete report for Trump on the national security implications of auto imports.

North Korea

Hong’s comments contrast with less confrontational language from President Moon, who’s tried to placate Trump on trade while keeping the military alliance strong and maintaining momentum in dialogue with North Korea. Nuclear disarmament negotiations between the U.S. and Pyongyang have stalled and the regime recently boasted of testing a new “advanced tactical” weapon.

In a wide-ranging interview, Hong said he still thinks there’s a high possibility of the North Korean leader Kim Jong Un visiting Seoul sometime this year.

“To encourage North Korea to carry out denuclearization, we should offer them options for the future and relief from some of their anxieties,” said Hong, although he added that any inter-Korean economic cooperation couldn’t go ahead until international sanctions are lifted.

Separately, Hong said the Korean economy faces economic difficulties in 2019, but that government spending will help to ease some of the pain from a likely slowdown.

“South Korea’s economy could weaken next year due to external risks,” said Hong. “We are highly dependent on trade and exports, and those could suffer.”

As well as the auto tariffs threat, Hong sees risks from additional interest-rate increases by the Federal Reserve, jitters in global financial markets and trade tension between the U.S. and China.

©2018 Bloomberg L.P.