Trump May Have Killed China Trade Deal With His Korean Drama

If you think you’ve had a rough week, think of South Korean President Lee Jae-myung. His financial situation is yet another reminder of the dangers of striking a deal with Donald Trump.

In August, the U.S. president and Seoul agreed to impose a 15% tariff. Two months later, in October, Trump visited South Korea, and he and Lee confirmed the tariff arrangement.

This week, an impatient Trump suddenly decided to raise tariffs to 25%. Ostensibly, the reason is that South Korea’s parliament did not move fast enough to enact the agreement.

To be fair, South Korea is less than a year away from its worst political crisis in generations. On December 3, 2024, then-President Yoon Seok-yeol declared martial law for bizarre reasons that are still difficult for 51 million Koreans to understand.

Since then, Asia’s fourth-largest economy has been busy impeaching and removing Yun Zheng before holding national elections in which Lee won. There wasn’t much free time to discuss the specifics of the tariff deal, including a $350 billion “signing bonus.” You might think that handing out funding equivalent to 20% of GDP might merit parliamentary debate.

As South Korea’s political system grapples with the trauma of late 2024 and the ensuing multifaceted fallout, it faces another crisis: Trump’s trade war.

Trump seems unaware of the damage his import taxes — and the flurry of bad news surrounding them — are doing to export-reliant South Korea. Of course, most of the trade war has been against China. But South Korea’s $1.86 trillion economy has been in the middle of the collateral damage zone last year. And it’s still trying to catch up.

Therefore, by suddenly pushing America’s top ally South Korea into the 25% zone, Lee must be wondering what Trump might do to America’s adversaries if he treats his friends this way.

However, Trump’s real message here may be to Chinese leader Xi Jinping. It reads: Avoid agreeing to the “grand bargain” trade war that Trump so desperately seeks.

So far, Xi Jinping has rather deftly avoided full negotiations with the Trump team. In late October, Team Xi even reached a one-year truce. That means Trump could host an event at the White House to celebrate the trade deal as early as early 2027.

That’s a bigger “if” because Trump has proven that he is anything but a man of his word. South Korea is just the latest. In the past few weeks, Trump has raised tariffs on eight European countries because they did not comply with the plan to acquire Greenland. That includes the U.K., the first major economy to let Trump win a trade deal.

Of course, Japan now lives with the daily fear that Trump will raise tariffs to 25%. Trump is likely to lash out at Japanese Prime Minister Sanae Takaichi for not delivering the $550 billion he demanded in exchange for a 25% tax.

However, China is the real prize. Xi Jinping’s economy now plays the same role Japan played in Trump’s worldview in the 1980s. But it’s also the economic “whale” Trump needs to make the trade war worth it for the MAGA faithful. If you are Xi Jinping’s Communist Party, why would you bother?

Even if China offers Trump the high-profile deal he dreams of, he may just need a little bad mood to be immune to new tariffs. After all, Canada is shrugging off 100% tariffs for daring to strengthen trade relations with China.

Xi Jinping also knows that Trump needs to make a deal and China does not. If push comes to shove, Xi Jinping is likely to offer Trump a trade truce that would bring minimal benefit to the United States, and Trump would move on. However, as Trump’s Korean drama suggests, sitting at the negotiating table with Trump World may be the last place Xi Jinping’s team wants to be.