Trump talks up trade deal prospects as Asia tour hits South Korea

By Trevor Hunnicutt, Jihoon Lee and Ju-min Park

GYEONGJU, South Korea (Reuters) -U.S. President Donald Trump began the final leg of his Asia trip in South Korea on Wednesday, optimistic about striking a trade war truce with Chinese President Xi Jinping and advancing an unresolved tariff deal with South Korea's Lee Jae Myung.

Arriving from Tokyo hours after North Korea test-fired a nuclear-capable cruise missile, Trump is due to meet with Lee on Wednesday in Gyeongju, a sleepy South Korean town hosting this year's Asia-Pacific Economic Cooperation forum, before Thursday's talks with Xi.

Speaking to reporters aboard Air Force One en route to South Korea, Trump dismissed the North Korea missile test and said he was squarely focused on his meeting with the leader of the world's second-largest economy.

"The relationship with China is very good. So I think we're going to have a very good outcome for our country and for the world, actually," Trump said.

He expects to reduce U.S. tariffs on Chinese goods in exchange for Beijing's commitment to curb exports of fentanyl precursor chemicals, he added. The U.S. could halve the 20% levies on Chinese goods it currently charges in retaliation for the export of such chemicals, the Wall Street Journal reported.

SOUTH KOREA TRADE TALKS STRUGGLE

Addressing a summit of APEC CEOs in Gyeongju before his meeting with Lee, Trump said a trade deal with South Korea would be finalised "very soon", though officials on both sides have been downplaying the prospect of a breakthrough this week.

The two allies announced a deal in late July under which South Korea would avoid the worst of the tariffs by agreeing to pump $350 billion of new investments into the United States. But talks over the structure of those investments have been deadlocked.

Trump has also pressed allies like South Korea to pay more for defence, and South Korea has sought reforms to U.S. immigration laws to allow for more workers to build factories after a raid on a Hyundai Motor battery plant in Georgia.

The leaders will discuss trade, investment and peace on the Korean peninsula at talks on Wednesday, Lee's office said, a reference to engagement with North Korea.

Trump has made repeated calls for a meeting with North Korean leader Kim Jong Un, including during this trip, but there has been no public comment from Pyongyang. Kim has previously said he could be open to talking if Washington stops pressing him to give up nuclear weapons.

Adding to the golfing gifts he received from Japan's leader in Tokyo on Tuesday, Lee will present Trump with a replica gold crown and award him with the "Grand Order of Mugunghwa", the country's highest decoration.

A "golden dessert" is on the menu for their working lunch, Lee's office said.

Trump was also treated to red-carpet welcome on the tarmac in the southern city of Busan earlier on Wednesday, featuring a cannon salute and a brass band rendition of Village People's YMCA, often played at the U.S. president's political rallies.

TAIWAN ON THE AGENDA?

Skipping the main APEC summit, Trump plans a dinner with Lee and bilateral meetings with several countries' leaders, including China's Xi, before he departs on Thursday.

Negotiators from the world's top two economies hashed out a framework on Sunday for a deal to pause steeper American tariffs and Chinese rare earths export controls, U.S. officials said. The news sent stocks soaring to record peaks.

Trump said he would speak to Xi about Nvidia's state-of-the-art Blackwell AI chips, with sales to China a key sticking point in trade talks.

Since taking office in January, Trump has vacillated on his position towards China-claimed Taiwan as he seeks to strike a trade deal with Beijing. Trump says Xi has told him he will not invade Taiwan while the Republican president is in office, but Trump has yet to approve any new U.S. arms sales to Taipei.

Taiwan Foreign Minister Lin Chia-lung said on Tuesday he was not worried that Trump would "abandon" the island in his meeting this week with Xi.

China said on Wednesday it "absolutely will not" rule out using force over Taiwan.

Trump told reporters on Wednesday that he did not know whether he would even discuss Taiwan with Xi.

FINAL STOP IN ASIA TRIP

Trump's trip to South Korea concludes a whirlwind swing through the region, among the hardest hit by his tariff policies and increased U.S.-China competition.

In Malaysia, he announced a slew of trade agreements and oversaw the signing of an expanded truce between Thailand and Cambodia after a border conflict.

In Tokyo on Tuesday, Trump lavished praise on Japan's first female Prime Minister Sanae Takaichi, welcoming her pledge to accelerate a military buildup and signing deals on trade and rare earths.

The U.S. and Japan also released a list of projects in which Japanese companies are eyeing U.S. investments, related to Tokyo's pledge earlier this year of $550 billion in strategic U.S. investments, loans and guarantees in exchange for a tariff reprieve.

Washington has pressed South Korea to make a similar arrangement, but Seoul says it cannot afford to pay the $350 billion it pledged upfront. Instead, South Korea has offered a mix of phased investments, loans and other measures.

On Tuesday, South Korean Foreign Minister Cho Hyun said a last-minute concession by the United States could lead to a deal.

(Reporting by Trevor Hunnicutt in Tokyo, Jihoon Lee and Ju-min Park in Gyeongju, South Korea; Writing by Josh Smith and John Geddie; Editing by Jamie Freed and Lincoln Feast.)