US-South Korea strike 15% tariff deal with US$350 billion in investments

After weeks of frenzied negotiations and mounting economic anxiety, the United States and South Korea have reached a sweeping trade agreement that slashes threatened tariffs and secures billions in investment. US President Donald Trump announced the pact on his Truth Social platform late on Wednesday. Under the deal, South Korean exports to the US will face a 15 per cent tariff – down from the 25 per cent levy that had been set to take effect on Friday. In exchange, South Korea has pledged US$350 billion in US investments, echoing a similar arrangement recently struck with Japan. As with Tokyo’s US$550 billion pledge, the spending will largely be directed by the US president, with a focus on American industries. “We have agreed to a Tariff for South Korea of 15 per cent. America will not be charged a Tariff,” Trump wrote, adding that Seoul had also agreed to “accept American product including Cars and Trucks, Agriculture, etc.” The commitment is expected to allow US vehicles built to American standards to enter South Korea without additional restrictions. The agreement also includes a pledge from Seoul to purchase US$100 billion in liquefied natural gas and other energy products from the US, supplementing recent commitments from the European Union and reflecting the Trump administration’s emphasis on energy exports as a pillar of its trade strategy. For South Korea’s newly elected president, Lee Jae-myung, the deal came at a pivotal moment. In a statement on Thursday, Lee described it as “the first major trade challenge” since his administration took office, proclaiming: “We have overcome a major hurdle.” He praised the agreement for “eliminating uncertainties” in the export environment and enabling South Korea to compete on “equal or superior terms” with key rivals such as Japan and the EU. According to the presidential office, the US$350 billion in investment commitments will be divided into two main components: a US$200 billion fund to be allocated to projects selected by the US and a US$150 billion fund aimed at revitalising the US shipbuilding industry. Kim Yong-bum, the presidential chief of staff for policy, clarified that most of these funds would consist of bank loans and investment guarantees for US-based projects, with only a minimal portion allocated to direct equity investments. “This deal will solidify the foundation for strategic industrial cooperation between the two countries,” Lee wrote on social media. The agreement, he said, would support “South Korean companies’ active expansion into the US market in sectors where we have global strengths – such as shipbuilding, semiconductors, secondary batteries, biotechnology, and energy.” He added that the US$150 billion fund, in particular, would help Korean companies such as Hanwha Ocean and Hyundai Heavy Industries enter the US shipbuilding sector. “This agreement reflects the convergence of the United States’ push to revive its manufacturing base and our commitment to boosting the competitiveness of Korean firms in the US market,” Lee said. “We expect this to further deepen industrial cooperation and reinforce the Korea-US alliance.” South Korea, the US’ sixth-largest trading partner, had scrambled to avoid the 25 per cent tariff that threatened to derail its export-driven economy, which is only just emerging from a period of contraction. Last year, the US was South Korea’s second-largest export market, with outbound shipments totalling US$127.8 billion – 18.7 per cent of the nation’s total exports. Vehicles comprised the largest share, at US$34.7 billion. South Korea posted a US$55.7 billion trade surplus with the US that same year. Hur Jung, an economics professor at Sogang University, called the deal “the best possible outcome for South Korea” under the unconventional trade environment shaped by the Trump administration. “This is good news. South Korean firms can maintain price competitiveness against foreign rivals and protect their market share in the United States,” Hur told This Week in Asia. This is good news. South Korean firms can maintain price competitiveness Hur Jung, South Korean economist Failure to reach agreement could have triggered the 25 per cent tariffs, potentially slashing South Korea’s exports to the US – especially vehicles, petrochemicals and semiconductors – by up to 20 per cent, according to Kim Dae-jong, a business professor at Sejong University. Washington is expected to announce country-specific tariff rates for semiconductors within the next two weeks. Hur noted that South Korea, alongside Japan, has most-favoured-nation status with the US, which is expected to result in lower tariffs on its semiconductor and medicine sectors. Last year, South Korea exported US$10.6 billion worth of semiconductors to the United States. The US-South Korea agreement follows a flurry of high-level lobbying in Washington by South Korean industrial titans, including Samsung Electronics chairman Lee Jae-yong and Hyundai Motor Group’s Chung Eui-sun. Their presence highlighted what was at stake for South Korea’s technology, automotive and shipbuilding sectors. Regional context also shaped the outcome. Japan’s recent deal with Washington set the bar at a 15 per cent tariff for Asian exporters able to offer major investment pledges, while Indonesia and the Philippines settled for 19 per cent, and Vietnam 20 per cent. Thailand and Cambodia, who have been embroiled in a recent violent border dispute, face tariffs as high as 36 per cent. President Lee is expected to visit Washington within a fortnight for a bilateral summit with Trump, his first since taking office in June, as both sides look to formalise the details of the agreement and chart a future course for economic cooperation. The meeting is also expected to address the US demand for greater defence burden-sharing by South Korea, including costs for hosting 28,500 American troops in the country. Yet while the deal averts immediate economic pain, it comes at a political price for Seoul. Concessions on US market access for American goods – especially in agriculture – could provoke backlash from South Korean farmers and threaten to fracture Lee’s party, even as the nation’s stock market basks in new-found optimism. For now, though, Seoul has won a reprieve, safeguarding its critical export industries and securing a foothold in a rapidly evolving US-led global trade framework. Additional reporting by Bloomberg

US-South Korea strike 15% tariff deal with US$350 billion in investments

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}The deal, announced by Trump, includes South Korean pledges for US agriculture, cars and US$100 billion in energy purchases

The deal, announced by Trump, includes South Korean pledges for US agriculture, cars and US$100 billion in energy purchases