President Trump has announced his intention to raise tariffs on imports from South Korea, including automobiles, lumber, and pharmaceuticals. The move comes amid accusations that South Korea has not fully implemented a trade deal reached last year, briefly impacting shares in Korean automotive companies.
Trade Dispute Escalates
In a social media post, the president stated that tariffs on South Korean exports to the US would increase from 15% to 25% due to the “Korean Legislature” not enacting what he termed a “Historic Trade Agreement.” He acknowledged that enacting the agreement is the legislature’s “prerogative.” The administration has not yet issued formal notices to enact these changes.
South Korea’s presidential office stated it was not given advance notice of the planned tariff increase. The country’s trade minister, Kim Jung-kwan, currently in Canada, is scheduled to travel to Washington to discuss the issue with US Commerce Secretary Howard Lutnick.
A Shift in Policy
This announcement represents a potential reversal of course, following a trade and security agreement finalized with South Korea last year after a period of difficult negotiations. The deal included investment commitments from South Korea and tariff reductions from the US.
However, the agreement has remained in a state of “legal limbo” within South Korea. Seoul’s presidential office previously argued the deal was a non-binding memorandum of understanding and did not require parliamentary approval. The ruling party in South Korea has now stated it will work with the opposition to expedite the passage of bills needed to enact the investment portion of the agreement.
The current agreement maintains US tariffs of up to 15% on South Korean goods, including vehicles, car parts, and pharmaceuticals. These tariffs were lowered from a 25% level previously imposed by President Trump earlier in 2025. The proposed increase would reinstate the higher tariff rate.
The automotive industry is a significant component of South Korea’s exports to the US, accounting for 27% of the total and representing nearly half of the country’s car exports. Initial market reaction saw shares in some South Korean carmakers fall by as much as 5%, though those losses were later partially recovered.
Broader Context
This action follows similar tariff threats made against other trading partners. Over the weekend, a 100% tariff was threatened against Canada should it pursue a trade deal with China. Earlier in January, tariffs were threatened against multiple European nations. The chair of international economics at the Atlantic Council, Josh Lipsky, noted that this action signals a continued lack of tariff stability.
Frequently Asked Questions
What specifically prompted this new tariff threat?
President Trump stated the tariffs are being considered because the South Korean legislature has not enacted the trade agreement reached last year.
What impact could these tariffs have on the auto industry?
The auto industry accounts for 27% of South Korea’s exports to the US, and nearly half of the country’s car exports go to the US market. Increased tariffs could negatively impact this sector.
Has the President followed through with tariff threats in the past?
Josh Lipsky of the Atlantic Council noted that while the President doesn’t always follow through on tariff threats, the volatility created by the possibility of such actions has a cost.
How will this situation unfold remains to be seen, but further negotiations and legislative action in South Korea are likely to be key factors in determining the future of US-South Korea trade relations.
