SSNHZ Samsung Electronics Company Ltd (PK)

By Andrew Jeong 

SEOUL--President Trump struck a cordial tone in a meeting with South Korea's largest businesses on Sunday, praising their investments in the U.S. But noticeably absent from his remarks: any mention of China's Huawei Technologies Co.

A day after agreeing to a trade cease-fire with Beijing, Mr. Trump stood before representatives of South Korea-based companies that supply Huawei with core parts including smartphone displays and memory chips. Seoul has walked a fine line in the protracted trade fight--and faced pressure from both countries to take their side.

China is South Korea's largest trade partner, buying about a quarter of its exports. The U.S. is a long-running ally on economic and security matters.

But in his roughly 30-minute speech, Mr. Trump provided no direction on how South Korean companies should proceed with Huawei, the world's largest maker of telecommunications gear and No. 2 smartphone seller. After a Saturday meeting with Chinese President Xi Jinping, the president said U.S. companies could sell high-tech equipment to Huawei--excluding goods related to national security.

That decision drew some immediate criticism from lawmakers. Some parts of the U.S. government have called Huawei a national-security risk, and last month the Commerce Department blacklisted the company, restricting its ability to buy American technology. It isn't clear how far Mr. Trump's concession goes.

Huawei's South Korean suppliers--including Samsung Electronics Co., SK Hynix Inc. and LG Display Co.--aren't likely bound by any U.S. restrictions. But their decisions on Huawei could produce political blowback from Beijing or Washington.

In his Sunday speech to local business leaders, Mr. Trump emphasized the broader economic achievements between the U.S. and South Korea. "You folks have done a great job," he said, before expressing admiration for some of the skyscrapers owned by Samsung and Lotte Group: "I said, 'What is that beautiful building? Love the design.'"

The meeting was attended by the heads of South Korea's largest conglomerates, including Samsung, Hyundai Motor and Lotte, whose chairman, Shin Dong-bin, met Mr. Trump at the White House in May after investing more than $3 billion in a Louisiana chemical plant.

A senior South Korean business official who attended the meeting said Mr. Trump hadn't raised concerns over Huawei or other large Chinese companies--a relief to many in the room. But this person added that South Korean business owners are aware that the U.S.-China trade war hasn't ended.

"For us South Korean companies, we can't upset any side," the official said. "If we upset the Chinese, there are repercussions. But we can't upset the U.S. either."

South Korea, Asia's fourth-largest economy, relies heavily on exports. The protracted U.S.-China trade fight has already done damage.

Its exports to China this year are down 15%, to about $55 billion, according to the Korea International Trade Association, a private, nonprofit trade group, citing figures through the end of May. That is partly offset by an increase of about 10% in exports to the U.S., its No. 2 trade partner, to $30 billion.

South Korean firms need to tread carefully, even given Washington's apparent lifeline to Huawei, said Troy Stangarone, a senior director at the Washington-based Korea Economic Institute.

"South Korea needs to balance its alliance with the United States, but also its economic interests with China," Mr. Stangarone said. "They should still move cautiously, as President Trump's decision may not be the final word on the matter."

Before Saturday's trade cease-fire agreement, both Washington and Beijing had made their perspectives known. The Chinese ambassador to Seoul privately visited a senior South Korean lawmaker as part of efforts to woo Seoul away from Washington's Huawei policy. Two days later, a senior diplomat from the U.S. Embassy in Seoul met with the same lawmaker.

The lawmaker, Yoon Sang-hyun, chair of the foreign-affairs committee of South Korea's legislature, echoed the Seoul government's public line, suggesting individual companies should decide the matter, according to a person familiar with the meeting.

South Korean companies, including Samsung and SK Hynix, were among the global tech companies summoned to Beijing for a meeting in June with Chinese authorities. There they were warned there could be repercussions if the companies responded too aggressively to U.S. trade restrictions, The Wall Street Journal previously reported.

Timothy W. Martin contributed to this article.

Write to Andrew Jeong at andrew.jeong@wsj.com

(END) Dow Jones Newswires

June 30, 2019 02:04 ET (06:04 GMT)

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