Rajiv Biswas, Asia Pacific Chief Economist, IHS Markit
· US President Trump stated on 30 June at a press briefing at the White House alongside South Korean President Moon Jae-in that the US policy of strategic patience with North Korea had failed and that patience is over.
· President Trump’s statement was preceded by an announcement by US Treasury Secretary Steven Mnuchin that the US had imposed sanctions on a Chinese shipping company, the Dalian Global Unity Shipping Co Ltd., as well as two Chinese individuals for facilitating North Korea’s nuclear weapons and missiles programs.
· At the same time, the US also imposed sanctions on a Chinese bank, the Bank of Dandong, for alleged money laundering for North Korea, with the US Treasury stating that the bank had acted as a conduit for illicit North Korean financial activity. The US Treasury’s Financial Crimes Enforcement Network will take immediate steps to prevent the bank from having access to the US and international financial systems.
· US Treasury Secretary Mnuchin has signaled that the US will meet with other G-20 countries at the G-20 Summit in Hamburg next week to discuss further measures to cut off North Korea’s illicit activities.
· As a result of the new US sanctions and expectations that additional banks could face sanctions, global banks are likely to step up their compliance measures in order to ensure that their counterparty banks are not involved in any illicit transactions involving North Korea’s nuclear weapons or ballistic missiles program or other forms of activities that could be construed as money laundering for North Korea.
· During his meeting with South Korean President Moon, President Trump also signaled that the US-Korea Free Trade Agreement (KORUS) which took effect in 2012 will be renegotiated, reflecting US concerns that the trade benefits of KORUS had been significantly tilted towards South Korea. The US trade deficit for goods and services with South Korea was USD 17 billion in 2016. Although the US trade deficit with South Korea for trade in goods was USD 27.7 billion in 2016, the US had a bilateral trade surplus for trade in services of USD 10.7 billion last year.
· Samsung Electronics announced just prior to the US-South Korea Summit that it would invest USD 1.9 billion in the US by 2020: with USD 1.5 billion to be invested in its Austin, Texas semiconductor plant; and a further USD 380 million to build a new home appliances plant in South Carolina, which is estimated to create 1,000 new jobs.