US will likely "make new demands if trade situation does not improve with South Korea": Obstfeld

California [US], September 4 (ANI): Maurice Obstfeld, a renowned economist and professor emeritus at the University of California, Berkeley, has expressed concerns over 'uncertainties surrounding' the South Korea-US trade agreement, announced in July 2025, under which South Korean goods will be subject to a 15 per cent tariff, while US exports will not face duties, as per the Maeil Business Newspaper.

While addressing a press conference on Wednesday, during his visit to Korea for the 2025 G20 Global Financial Stability Conference, he said, "What is concerning is that there can be very different interpretations of the agreement between Korea and the United States."

"Details such as the structure of profit-sharing and who will be responsible for investment have not been spelled out," he added.

Obstfeld, who has held prominent positions such as chief economist at the International Monetary Fund and a member of the White House Council of Economic Advisers under President Barack Obama, noted that Washington, DC, will likely "make new demands if the trade situation does not improve."

Obstfeld also highlighted the difference in negotiation approaches between the past and present US administrations, Maeil Business Newspaper reported.

"During Donald Trump's first term, negotiations were conducted in a reliable way thanks to US Trade Representative Robert Lighthizer," he said. "But this time it was not the case. Washington will likely make new demands if the trade situation does not improve to the level it wants on a monthly or quarterly basis."

As for potential new US demands, Obstfeld pointed to exchange rates.

"While America's high-tariff policy drives down the value of the Korean won, the US wants the won to appreciate," he said. "However, a Mar-a-Lago-style agreement to forcibly push up the won will not happen."

According to Maeil Business Newspaper, Obstfeld emphasises the importance of maintaining healthy trade relations with China, stating, "China is a hugely important trade partner for Korea, and if trade relations with China sour, the Korean economy will pay a high price."

He recommends that Korea consider joining the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), led by Japan, to prepare for potential reductions in trade with the US. He notes, "Joining the CPTPP would be a very good decision for Korea. The US may see it as a threat, but it will not be perceived as an act of defiance."

Charles Engel, professor of economics at the University of Wisconsin-Madison, criticises the Trump administration's tariff policies, pointing out that raising tariffs can reduce imports, which in turn can lead to decreased tariff revenues.

"Raising tariffs reduces imports, which means tariff revenues can decline," he said. "To increase tariff revenue, imports need to grow, but that outcome conflicts with the goal of reviving domestic manufacturing."

Korea's first Vice Minister of Economy and Finance, Lee Hyoung-il, highlights the pressure on the global financial system, saying, "The long-standing, rules-based free trade system is under comprehensive pressure for restructuring. This could destabilise not only the flow of capital, labour, and production but also the existing order of international finance."

Cho Dong-chul, president of the Korea Development Institute (KDI), a state-run think tank, added, "Amid high interest rates and slowing growth, many emerging and developing economies are facing debt vulnerabilities, which pose a threat to the sustainability of global financial stability." (ANI)

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