South Korea reassures on US investment pledge after Trump threatens to hike tariffs
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South Korea had been working to implement a deal that was going to lower US tariffs against its exports.
PHOTO: BLOOMBERG
SEOUL/WASHINGTON - South Korea scrambled on Jan 27 to assure the US it remained committed to implementing a trade deal after President Donald Trump said he would hike tariffs on autos and other imports from its ally, blaming a delay in enacting the pact agreed in 2025.
Mr Trump said on Jan 26 that South Korea’s Parliament was not living up to its side of the deal by swiftly enacting the agreement he reached with President Lee Jae Myung to make huge investments in US business projects in return for tariff cuts.
For South Korea, the decision, which officials in Seoul said caught them by surprise, is the latest setback as it tries to navigate the alliance and trade partnership amid potential challenges to its security and financial stability posed by Mr Trump’s demands.
Trump and Mr Lee struck a deal in principle last July
“President Lee and I reached a Great Deal for both Countries on July 30, 2025 and we reaffirmed these terms while I was in Korea on Oct 29, 2025,” Mr Trump wrote on social media.
Mr Trump said South Korea’s legislature had not enacted the deal and as a result: “I am hereby increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15 per cent to 25 per cent.”
It was not immediately clear when the tariff hike would take effect.
A source familiar with internal discussions between the countries said Mr Trump may have been prompted by recent South Korean regulatory actions against Coupang
The countries have been in talks to address Washington’s concerns about regulations on US tech firms as part of the trade deal.
South Korea’s presidential Blue House said it was committed to implementing the deal and would continue to take the required steps to finalise it to stave off tariff hikes.
Mr Lee’s chief policy aide convened an emergency meeting with officials and the industry minister, Mr Kim Jung-kwan, who is currently in Canada, would visit the US soon and meet with Secretary of Commerce Howard Lutnick, the Blue House said.
A top trade envoy will also visit Washington soon to meet US Trade Representative Jamieson Greer, it added.
The White House and Mr Greer’s office did not respond to requests for comment.
South Korea’s ruling Democratic Party said five Bills that would enact the US investment are now pending committee review and with backing from the opposition, Parliament should be able to speed up their passage.
It did not give a timeline for the vote.
South Korea’s benchmark KOSPI index fell 1.19 per cent before reversing early losses to trade 1.3 per cent higher, while the won weakened 0.5 per cent against the dollar.
Mr Trump has upended global trade by imposing tariffs on nearly every country since beginning his second term in office in 2025.
In some cases, he has threatened tariff hikes and delayed them or not followed through.
Mr Choi Seok-young, a former South Korean trade negotiator, said Mr Trump’s message could be seen as “a political move in which the United States is exerting maximum pressure on South Korea in an effort to force concessions during the ongoing negotiations over non-tariff barriers.”
Exports to US fall in 2025
South Korea’s exports hit a record high of US$709.4 billion (S$901 billion) in 2025, up 3.8 per cent from 2024, while US-bound shipments stood at US$122.9 billion, falling 3.8 per cent but still making it the second-biggest market after China.
Auto exports to the US stood at US$30.2 billion, accounting for 25 per cent of the total US shipments, the biggest of any South Korean sector, but down 13.2 per cent from 2024.
After 2025’s agreement by their leaders, Washington and Seoul set tariffs on US imports of Korean autos and auto parts at 15 per cent
The 15 per cent rate took effect on Nov 1, 2025.
Higher tariffs would hit South Korean automaker Hyundai Motor and its affiliate Kia particularly hard, with their shares initially falling 4.8 per cent and 6 per cent, respectively, before recovering to trade 0.4 per cent higher and 1.2 per cent lower.
Hyundai did not respond to a request for comment.
General Motors, which produces about 500,000 vehicles annually in South Korea and exports most of them to the US, also did not comment.
Currency concerns
Under the deal struck in 2025, South Korea committed to pay US$200 billion of the US$350 billion in cash in phased installments capped at US$20 billion a year in an effort to maintain won stability.
Earlier in January, South Korea’s finance minister Koo Yun-cheol told Reuters the government planned to implement the investment package as soon as possible, while noting that uncertainty over an expected US Supreme Court ruling on Mr Trump’s tariffs could affect the process.
He said the country’s planned investment of US$350 billion was unlikely to kick off in the first half of 2026, given the weak won currency.
The prospect of large currency outflows has caused headaches for authorities in Seoul at a time when the won has slumped to trade at levels unseen since the global financial crisis from 2007 to 2009. REUTERS
