Editor's Note: This article is the fourth installment in an ongoing RANE series on the shifting patterns of global trade. The first installment provided a broad overview of the geopolitical and economic implications of these shifts. The second examined how recent changes to U.S. trade and tariff policies will affect nearshoring trends in Canada, Latin America and the Caribbean. The third assessed how rising tensions between Israel, the United States and Iran could impact shipping in the Strait of Hormuz.

U.S. tariffs on South Korea and Japan could sway upcoming leadership contests in both countries, modestly increase their trade with China and erode U.S.-South Korea defense cooperation, but they are unlikely to undermine U.S.-Japan security ties. From April 16-18, Japanese and U.S. officials held trade negotiations in Washington, and South Korean representatives are expected to travel to the United States in the coming days to begin their own talks. These moves come after U.S. President Donald Trump on April 9 granted a 90-day pause to "reciprocal" tariffs on most countries — including tariffs of 24% on Japan and 26% on South Korea — bringing the reciprocal tariff down to 10% for all countries except China. This reprieve did not, however, apply to imported vehicles or auto parts, key export industries in both South Korea and Japan that rely heavily on exports to the U.S. market. Those goods were subjected to their own 25% tariff on April 3, as were energy, steel and aluminum, and a small selection of other exports. These moves came despite pledges by Japanese Prime Minister Shigeru Ishiba and South Korean conglomerate and automobile manufacturer Hyundai to increase investment in the United States in the months before the U.S. announcement of reciprocal tariffs on April 2.

• On Feb. 7, Ishiba and Trump met in Washington and held a joint press conference in which both referenced the prospect of major new Japanese investments in the United States. They emphasized a long-stalled Alaskan natural gas pipeline project, with the leaders hinting at a $1 trillion investment, though this was not explained in detail. Trump noted that the two countries could work out the U.S. $100 billion trade deficit with Japan quickly via oil and gas, referencing future Japanese energy purchases from the Alaskan pipeline project.
• On March 24, Hyundai Chair Euisun Chung held a joint press conference with Trump in which they announced that Hyundai would invest $21 billion in onshoring manufacturing capacity in the United States, including $5.8 billion for a Louisiana steel plant and $3 billion for U.S. liquefied natural gas to fuel that plant, in the coming years. Trump noted, "As a result [of this investment], they'll not have to pay any tariffs."

Given their trade dependencies on the United States, South Korea and Japan have focused on negotiations and economic coping strategies while eschewing retaliation, and though the White House appears open to trade talks, it has not yet signed a deal on reciprocal tariffs with any country or defined its terms. Tokyo and Seoul have ordered their administrations to focus on trade negotiations with Washington in the hopes of extracting permanent tariff relief as soon as possible. The leaders of Japan and South Korea have also made it clear in public statements that they do not intend to retaliate with tariffs on U.S. goods since this would only exacerbate trade tensions, as evidenced by the rapid escalation in U.S. reciprocal tariffs on China (from 34% on April 2 to 125% now) following Chinese retaliation. These pro-engagement, anti-retaliation stances are driven by Japan's and South Korea's deep dependencies on the United States as an export market, particularly in the automobile sector, and as a treaty ally. These dependencies also undergird their strong desire to reach trade deals before the end of the 90-day pause on U.S. reciprocal tariffs. For their part, White House officials have signaled a willingness to hold trade talks with Japanese and South Korean representatives — who are some of the first to be granted time with U.S. officials — but Washington has yet to reach a deal to cut reciprocal tariffs with any country. It is also unclear to what degree Trump will insist on political or military concessions, which could entail increased Japanese or South Korean contributions to U.S. military forces stationed in their countries.

• In 2024, the United States was the second-largest trade partner of both Japan and South Korea, buying $141 billion of Japanese exports and $128 billion of Korean exports. These purchases included $50 billion in Japanese vehicles (or 33% of Japan's vehicle exports) and $43 billion in South Korean vehicles (47%). Meanwhile, Japan and South Korea bought $85 billion and $72 billion of U.S. imports, respectively. The World Bank estimates that exports of goods and services were equivalent to 44% of South Korea's gross domestic product in 2023, versus 22% for Japan and 11% for the United States. 
• Acting South Korean President Han Duck-soo has pledged "all-out" efforts to negotiate with Washington, and he ordered the government to draft emergency support measures to assist companies (especially in the auto industry) impacted by U.S. tariffs. Asked on CNN on April 8 whether South Korea might seek to counter U.S. tariffs, Han said, "We will not take that route" and expressed doubts about the utility of "fighting back." 
• On April 5, Ishiba responded to a Yomiuri TV interview question about retaliatory tariffs by saying, "all options are open," but added, "we have no intention of engaging in tit-for-tat talk." On April 4, the prime minister's office published a list of initial economic support measures to account for U.S. tariffs, including establishing nationwide offices to gauge business impacts, facilitating public safety net loans and advising small auto parts businesses.
• Several Japanese government sources told The Asahi Shimbun newspaper that in Trump's meeting with top Japanese trade negotiator Ryosei Akazawa on April 17, Trump raised (among other issues like trade) the topic of uneven mutual defense obligations in their security treaty and of Japanese cost-sharing for U.S. Forces Japan.

In South Korea, U.S. tariffs will become a campaign focal point of the June presidential election, with a possible trade deal giving the ruling People Power Party an advantage and the lack thereof (or significant trade concessions) further increasing the odds of a victory for the opposition Democratic Party of Korea. Seoul is due to hold an early presidential election on June 3 following the Constitutional Court's confirmation on April 4 of former South Korean President Yoon Suk Yeol's impeachment over his Dec. 3-4 martial law declaration. With South Korea's high economic reliance on exports, U.S. tariffs represent a top economic threat that will dominate the presidential campaign trail for the next two months. So far, even South Korea's opposition has shied away from calling for trade retaliation, and that is unlikely to change. Still, the DPK and PPP will compete to propose the best response to U.S. tariffs, including negotiating strategies, industrial policies (such as cheaper financing for exporters), and domestic economic support to alleviate cost-of-living concerns. Should the United States and South Korea agree to a trade deal before June 3 — an uncertain prospect given U.S. negotiations with all partners are in their infancy — this could represent a major electoral boost for the ruling PPP. However, if the electorate and the DPK deem the government's concessions too extensive — e.g., in the case of voluntary export restrictions for the automobile sector, whose unionized employees are prone to protest — this could hurt the PPP's chances. Until negotiators reach such a deal, cost-of-living concerns in South Korea will deepen, particularly concerns about the inflation of essential goods surpassing wage increases, which may take a hit if South Korean manufacturers hold off on raises amid uncertainty about the U.S. export market. Thus, in the interim, the DPK will maintain an electoral advantage — partly gained in the aftermath of Yoon's martial law bid — as it tends to propose greater spending on households.

• As of April 17, 54% of Koreans said they supported a transition of power to the opposition DPK in the next presidential election, according to the National Barometer Survey. This is up from 47% in mid-March, but that period between surveys encompasses both the impeachment of President Yoon and the announcement of U.S. reciprocal tariffs, so it is difficult to determine the specific reason for the shift.

Likewise, a U.S. trade deal could keep Japan's embattled prime minister afloat, but the absence of a deal, a tariff escalation or a bungling of U.S.-Japan negotiations could see him ousted following upper house elections in July. Prime Minister Ishiba came into office in October 2024 following a political finance scandal that took down his predecessor and led to a major loss of seats for his Liberal Democratic Party in lower house elections. This reduced Ishiba to leading a minority government and negotiating with small opposition parties to pass all policies. Diet deliberations since October have focused on cost-of-living concerns, including expanding coverage for free high school tuition, raising the minimum taxable income level and offering consumption tax cuts. This comes as all parties are positioning themselves for upper house elections in July. Thus, U.S. trade negotiations and the economic impacts of U.S. tariffs — particularly on wages and employment in Japan's massive automobile manufacturing sector — will likely consume the attention of the LDP and opposition parties ahead of July. If Ishiba can pull off a trade deal with Washington or even just secure another pause on tariff implementation as talks progress, it could keep him in office beyond the July elections. Though those elections are currently projected to replicate the LDP's October losses, trade negotiations that quickly remove U.S. tariffs could blunt this risk, reducing the likelihood that opposition parties unify to pass a vote of no confidence against him or that the conservative wing of the LDP gains broader support to replace Ishiba in internal party elections. Conversely, bungled trade talks (including accusations that Tokyo has given too many concessions on Japan's auto industry), the resumption of U.S. reciprocal tariffs after the 90-day reprieve (which would come in early July, just weeks before the election), or a failure to pass sufficient economic support measures for households could lead to Ishiba's ouster, as his public approval is already low for a first-year prime minister.

• April opinion polls from public broadcaster NHK showed Ishiba's approval rating at 35%. This is much better than the 25% support that Ishiba's predecessor, Fumio Kishida, had when he announced his intent to resign in August 2024, but 35% is still low for a Japanese prime minister only six months into his tenure. Support for the LDP, meanwhile, was 30%, which is average for the party after the November 2023 political finance scandal but still comparatively low given LDP support fluctuated in the 30%-40% range for years before the scandal.

Amid U.S. trade policy shifts, South Korea and Japan will seek to improve trade ties with China, though differences in market demand and lingering fears of economic coercion suggest any trade tilt toward China will be modest. The gravity model of trade holds that countries with large economies that are geographically close to each other should have strong trade ties. For South Korea and Japan, this model has held true for decades regarding their trade with China. Thus, amid U.S. trade tensions, it would be natural for Seoul and Tokyo to seek to improve already significant trade ties with China, and such efforts are underway, as evidenced by a recent trilateral trade ministers summit and Japan-China party talks. However, there are major impediments to bolstering trade ties. It is difficult to replace even part of the U.S. consumer market with China's, given that Americans are wealthier and buy a different basket of goods than the Chinese. One potent example is vehicles, as the United States is the top buyer of both South Korean and Japanese vehicles; by contrast, China is only a minor buyer, a disparity driven primarily by spending power differences but also by strong state support for Chinese carmakers. Moreover, since 2022, the United States has imposed heavy trade restrictions on shipments of advanced chips and equipment thereof — another top export industry for South Korea and Japan — preventing them from selling some related products to China, so the capacity for expanding electronics trade with China also has limits. Washington is not alone in leveling trade restrictions on South Korea and Japan, however, as China has frequently wielded economic coercion against Seoul and Tokyo. In 2017, China cut off imports of Korean pop music (a ban that persists today) and various consumer goods, as well as Chinese tourism outflows, in retaliation for Seoul's deployment of the U.S. Terminal High Altitude Area Defense, or THAAD, missile system. In 2023, China cut off all Japanese seafood imports — a politically sensitive industry given the LDP's support base lies in rural prefectures — following Tokyo's cooperation with U.S. chip restrictions on China and Tokyo's public opposition to Chinese aggression against Taiwan. 

• In 2024, China was the top trade partner of both Japan and South Korea. That year, Japan imported $167 billion of Chinese goods and exported $125 billion to China, while South Korea bought $140 billion of Chinese imports and exported $133 billion to China. Despite its top trade partner status, China is not a major buyer of Japanese or Korean automobiles, buying just $9 billion of Japanese vehicles (or 6% of the total) and $1.3 billion of Korean cars (1.5%), a small share compared with U.S. purchases.
• On March 30, the trade ministers of China, South Korea and Japan met in Seoul for their first economic dialogue in five years, where they agreed to deepen cooperation, including on the implementation of the Regional Comprehensive Economic Partnership trade agreement, signed in 2020. They also agreed to continue talks on a trilateral free trade agreement, ongoing since 2012. China's readout claimed the three agreed to coordinate their response to U.S. tariffs, but Tokyo flatly rejected this claim and Seoul called it an exaggeration. 
• Japan's LDP and the Chinese Communist Party held their first party-to-party talks in six years in January, when the two sides agreed to strengthen ties between their peoples (e.g., by relaxing visa requirements) and to bolster think tank and media exchanges to improve public perception of the bilateral relationship.

Despite economic tensions with the United States, tariffs are unlikely to significantly impede U.S.-Japan defense cooperation, but trade restrictions and an impending leadership change could blunt U.S.-South Korea defense ties, and trade deals could pressure both U.S. allies to raise their financial support for overseas U.S. military deployments. Despite U.S. trade tensions, concerns about China's military threats to regional stability — namely, around Taiwan, the South China Sea and disputed Japanese islands — will likely keep Japan heavily engaged with the U.S. military, particularly as the Pentagon under Trump focuses on competing with China and deterring a Chinese invasion of Taiwan. This will include further progress on a joint command structure to give U.S. Forces Japan and the Japanese military greater interoperability and freedom of action in addressing emergent Indo-Pacific threats, like a Chinese invasion of Taiwan. South Korea's domestic political environment, however, could blunt U.S. defense cooperation. The opposition DPK traditionally tries to avoid military provocations with China to preserve economic ties, and the party is currently projected to win the June presidential election. In this scenario, U.S. tariffs would only heighten the party's impulse for economic protection, as evidenced by DPK head Lee Jae-myung's economy-focused campaign platform. Thus, U.S.-South Korea cooperation, particularly joint maritime and aerial drills in the Yellow and East seas aimed at deterring North Korean missile threats, may wane, though the broader U.S.-South Korea military alliance — manifest in the large, permanent U.S. military deployment to South Korea — will survive. Either way, trade negotiations could lead both the Japanese and South Korean governments to pay more for the maintenance costs of U.S. forces deployed in their countries, which would raise the ire of opposition parties but would not by itself erode defense ties.

• An internal Pentagon memo, leaked in late March, showed U.S. Secretary of Defense Pete Hegseth stating the Pentagon would "assume risk in other theaters" by letting partners and allies address local threats outside of the Indo-Pacific while the Pentagon focused on China as the "sole pacing threat" and the "denial of a Chinese fait accompli seizure of Taiwan" as the U.S. military's "sole pacing scenario."
• In June 2017, two months after the THAAD system became operational in South Korea, DPK-aligned then-President Moon Jae-in announced in his first month in office that he was pausing all future THAAD deployments. This came months after Moon on the campaign trail pledged to pursue government policy on THAAD that "meets the interests of security and the economy through consultations with the U.S. and China."
• DPK leader Lee Jae-myung, who declared on April 10 his candidacy for the June 3 presidential election, has for months maintained a strong lead in South Korean public opinion polls about the presidential race. On April 11, Lee revealed a policy roadmap in which he upheld reviving the economy as a paramount concern and posed Trump's "global war of 'America First'" as an "enormous survival challenge" to South Korea.