US-South Korea trade deal slashes tariff, secures $350bln investment
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Despite backing down on harsher tariffs, Washington pressured Seoul into a vague $350 billion investment pledge, raising questions about economic coercion and transparency.
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A man walks by the display of the capital city’s logo near the Seoul City Hall in Seoul, South Korea, Tuesday, January 12, 2021. (AP)
US President Donald Trump announced that his administration would impose a 15% tariff on South Korean imports, stepping back from a previously proposed 25% rate. The move comes as part of a broader agreement aimed at defusing trade tensions with one of Washington’s key Asian allies and major economic partners.
The deal was revealed shortly after Trump hosted South Korean officials at the White House, and landed amid a flurry of trade developments ahead of Trump’s self-imposed August 1 deadline, by which a new set of tariffs was expected to take effect. Until now, imports from South Korea, renowned for its electronics, automobiles, and steel, had faced the threat of significantly steeper levies.
"I am pleased to announce that the United States of America has agreed to a Full and Complete Trade Deal with the Republic of Korea," Trump declared on his Truth Social account.
The agreement also marked a major early test for South Korea’s new president, Lee Jae Myung, who took office in June following a snap election. Lee welcomed the outcome, saying it provided much-needed clarity for exporters and ensured tariffs were either on par with or lower than those faced by other trading nations. "We have crossed a big hurdle," Lee wrote in a Facebook post. Trump, in turn, announced that Lee would make his first official visit to the White House "within the next two weeks."
Greater access for US goods in South Korea
As part of the package, South Korea committed to investing $350 billion in the United States, focusing on projects selected by Trump himself. The country also agreed to purchase $100 billion worth of American energy products.
Trump further claimed that South Korea would allow greater market access for US goods, including cars and agricultural products, without levying import duties.
However, South Korean officials clarified that key domestic markets such as rice and beef would remain protected. Talks over Washington’s concerns regarding food safety regulations were said to be ongoing.
"We avoided the worst and chose the next best," commented Cheong In-kyo, a former South Korean trade minister. He cautioned that the ultimate impact of the deal would hinge on the specifics of the investment pledges. "Depending on how and where the $350 billion will be spent, this fund will be looked at differently."
Investment promises clouded by lack of clarity
Despite the headline figures, many of the agreement’s details remain murky. Questions linger over how the pledged investments will be structured, how they will be financed, and whether any of the commitments will carry legal weight. Trump indicated that further announcements from South Korea would follow.
Of the promised $350 billion, South Korea’s presidential office stated that $150 billion would support a new shipbuilding initiative. The remaining $200 billion is earmarked for sectors including semiconductors, nuclear energy, batteries, and biotechnology, according to Kim Yong-beom, policy chief for President Lee.
Kim noted that existing South Korean investment plans would be folded into the $350 billion package. He also defended the deal’s ambiguity, saying, "ambiguity is good," but emphasized that safeguards had been put in place to monitor how the funds are utilized.
US Commerce Secretary Howard Lutnick added via X that "90% of the profits from the $350 billion fund were going to the American people." Kim responded that South Korea interprets this to mean those profits will be reinvested into the US economy.
Energy imports will span liquefied natural gas (LNG), liquefied petroleum gas (LPG), crude oil, and a limited quantity of coal, Kim explained. "This is within our usual import volume," he said, noting that the shift may slightly recalibrate South Korea’s energy sourcing from the Middle East to the US.
Lutnick said the energy deals are scheduled to roll out over "the next 3.5 years." He also confirmed that the new 15% tariff would apply to South Korean automobiles, while the country’s semiconductor and pharmaceutical exports would not face additional restrictions compared to other trading partners. Notably, the agreement does not cover steel, aluminum, or copper.
Political upheaval adds urgency to dealmaking
The trade talks unfolded against a volatile political backdrop in Seoul, following the impeachment and removal of former President Yoon Suk Yeol in April. Yoon had faced widespread backlash over an attempt to impose martial law.
South Korea has long drawn the ire of Trump for its persistent trade surplus with the US and the financial burden of hosting roughly 28,500 American troops on the Korean Peninsula. In 2024, the country recorded a $55.7 billion trade surplus with the United States, a 25.4% increase from the previous year.
Despite being one of only three Asia-Pacific nations with an existing free trade agreement with the US, South Korea was not spared from Trump’s tariff threats. Pressure intensified earlier this month after Japan secured a deal with Washington to cut potential tariffs to 15%.
In a last-ditch bid to finalize an agreement, major South Korean firms moved swiftly to cement high-profile deals with US counterparts. Samsung Electronics signed a $16.5 billion chip supply deal with Tesla, while LG Energy Solution agreed to a $4.3 billion contract to provide Tesla with batteries for energy storage systems, according to a source familiar with the matter.
