In an interview with The Korea Economic Daily, Wendy Cutler, senior vice president of the Asia Society Policy Institute (ASPI) and a former acting deputy U.S. trade representative (USTR), offered her assessment of the U.S.-China, US-Korea relationship and the outlook for negotiations. A veteran trade negotiator, Cutler led the U.S. team during the Korea-U.S. Free Trade Agreement (KORUS FTA) talks.
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“The United States and China are both seeking to de-risk their economies by reducing mutual dependence,” she explained. “Given that their trade and investment ties remain deeply intertwined, the key question now is how to manage this competition. We‘ve seen repeated cycles of stabilization, tension, and re-stabilization - and that pattern is likely to continue.”
She emphasized that preventing escalation and maintaining open communication channels would be essential to keep the rivalry under control.
According to Cutler, the U.S.-China confrontation has now moved beyond tariffs into a contest over advanced technologies and supply chains.
“Future negotiations will no longer center on tariffs but increasingly more on export controls - particularly over critical technologies and strategic resources,” she said. “China is fully aware of its leverage in rare earths and magnets, while the U.S. is countering by tightening restrictions on the export of key software semiconductors and advanced technologies.”
“Tariffs are losing credibility as a bargaining tool,” she continued. “The real battlefield of economic diplomacy has shifted to technology sanctions and supply chain management.”
Regarding the anticipated meeting between Chinese President Xi Jinping and U.S. President Donald Trump during the APEC summit, Cutler was cautious. “I do not expect a breakthrough,” she said. “We’re more likely to see efforts to de-escalate tensions and some incremental progress on pressing matters like soybean purchases The outcome of the senior-level meetings between Secretary Bessent and Vice Premier He this weekend will provide an early signal of where the leaders‘ talks are headed.”
Turning to Korea’s position, Cutler noted that Seoul, like many countries, faces a delicate balancing act between Washington and Beijing.
“Korea remains a critical partner for the U.S. in strategic industries such as batteries, semiconductors, and shipbuilding,” she said. “I expect this cooperation to deepen, not weaken, as both sides recognize their mutual dependence in these sectors.”
She also addressed the ongoing negotiations on a $350 billion Korea-U.S. investment fund, describing it as more than just an investment protection arrangement.
“This investment fund is fundamentally about expanding investments within the United States,” she said. “Despite Korean input into the investment projects to be greenlighted, Washington retains the ultimate approval authority, The upcoming summit could serve as a decisive, action-forcing moment to get both sides to reach agreement on the sticking points.”
According to Cutler, key agenda items include currency swap mechanisms, cash investment ratios, timeline for implemtation and tax incentives - all under active negotiation between the two governments. “The summit will effectively mark a turning point,” she said. “If the two sides fail to reach a deal, it could be difficult to sustain momentum afterward.”
She warned that failure to reach an agreement could have direct economic repercussions for Korea.
“If there is no deal, Korean automotive exports could remain subject to a 25% U.S. tariff,” Cutler cautioned. “That‘s why this summit is such a critical inflection point for both countries.”
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- In recent years, U.S.-China tensions have evolved from short-term frictions into a structural strategic rivalry. Can this competition remain manageable?
△ The United States and China are already in a relationship of strategic competition. This dynamic will not change in the short term. Both countries will continue to pursue de-risking - efforts to reduce mutual dependence, particularly in strategic sectors.
That said, the two economies remain deeply intertwined through trade and investment. The challenge now is not to eliminate competition, but to manage it responsibly. Over the past nine months, we have seen a repeating pattern of stabilization, tension, and re-stabilization, and I expect this cycle to continue. My hope is that both sides can manage this important relationship in a stable manner and maintain communication channels to prevent their differences from escalating into major conflicts.
- China’s tightening export controls on rare earths and the U.S.‘s enhanced restrictions on advanced technology exports are bringing the rivalry into the real economy. Will future negotiations focus more on supply chains and industrial policy?
△ Yes. Until now, most U.S.-China talks have centered on tariffs. Going forward, however, export controls-especially over key technologies and strategic resources-will become far more important.
China understands well the leverage it holds in critical minerals such as rare earths and magnets. The U.S., meanwhile, is responding by considering and implementing tighter export controls on key software,semconductors and advanced technologies.
Tariffs are losing their power as a tool of leverage. In fact, when the US imposed high tariffs on China earlier this spring, the U.S. stock and bond markets reacted negatively, prompting the Trump administration to retreat. As a result, tariffs have lost credibility as a negotiating weapon, and the focus is shifting to export controls and technology sanctions.
- A meeting between President Xi Jinping and President Donald Trump is scheduled during the APEC summit on the 30th. Do you expect substantial progress?
△ There are multiple possibilities. The summit could bring a breakthrough in relations, or it could end in a breakdown. My personal view is that the outcome will likely fall somewhere in between - partial progress and incremental announcements.
- The U.S. has been urging allies, including South Korea, to align with its efforts to counter China. How should Seoul strike a balance?
△ Many countries, not just Korea, are walking a fine line between Washington and Beijing. Each nation must determine how to navigate this space based on its own strategic interests - and it is by no means an easy task.
That said, Korea remains an important partner for the U.S. in key sectors such as batteries, semiconductors, and shipbuilding. I am confident that cooperation in these areas will continue and, in fact, grow stronger.
- A $350 billion Korea-U.S. investment agreement is reportedly under negotiation. What is at the core of this deal?
△ This negotiation, valued at roughly $350 billion, goes beyond simple investment protection. Its essence is to expand Korean investments within the United States.
Because Washington holds the final approval authority - effectively a veto - the talks are quite difficult. High-level discussions between the two governments are ongoing, and the upcoming summit could serve as an action-forcing event that leads to a breakthrough. Success may be possible if the two leaders can narrow their remaining differences over investment conditions and approval structures.
- Seoul has requested measures such as a currency swap, a relaxation of cash investment ratios, and expanded tax incentives and subsidies. Do you expect progress on these issues?
△ We are now entering the core phase of the negotiations. Details such as the currency swap, investment size, timeline for project implementation, and loan guarantee ratios are under intense discussion.
The leaders‘ summit will effectively serve as the moment that forces a decision. If no agreement is reached, it will be difficult to maintain momentum afterward. In that case, Korea risks continuing to face a 25% automotive tariff and uncertainty in its trade with the US That’s why this meeting is such a critical turning point.
If the two sides reach an agreement on the investment fund, other areas of negotiation could also move quickly toward resolution.
- Korean companies see both opportunity and risk in the U.S. market - access and job creation on one hand, but also technology leakage and lower profitability. How should they strike a balance?
△ This is not a challenge unique to Korean firms. Companies around the world are facing the same dilemma. The business environment has changed dramatically, and the global models that once seemed stable are being shaken.
Firms must now learn how to manage uncertainty and adapt to a new reality. This is part of a larger structural transformation that all global corporations are experiencing together.
-Could the current negotiations become a milestone for a broader “economic security alliance” between the U.S. and Korea?
△ I certainly hope so. If the talks conclude successfully, they will form the foundation for deeper strategic cooperation between the two countries.
The U.S. and Korea have a long-standing alliance, and this agreement could pave the way for sustained collaboration in critical industries such as semiconductors, batteries, electric vehicles, pharmaceuticals, and shipbuilding - all central to future global supply chains and economic security.
Frankly, the U.S. cannot succeed in these areas without close cooperation from its allies, including Korea. With its technological capabilities and production capacity, Korea is among the most trusted partners. I hope this negotiation becomes not only a trade agreement but the first step toward a long-term partnership.
