Shipping containers at the Busan Port Terminal in Busan, South Korea. Photographer: SeongJoon Cho/Bloomberg.
President Donald Trump threatened to hike tariffs on goods imported from South Korea to 25 percent, citing what he said was the failure of the country's legislature to codify the trade deal the two nations reached last year. In a social media post yesterday, Trump said the new rate would apply to autos, lumber, pharmaceutical products, and "all other Reciprocal TARIFFS." Under the existing agreement, the president set a 15 percent levy on South Korean exports.
"South Korea's Legislature is not living up to its Deal with the United States," Trump said in his post. "In each of these Deals, we have acted swiftly to reduce our TARIFFS in line with the Transaction agreed to. We, of course, expect our Trading Partners to do the same."
If implemented, the move could have wide-ranging effects on major South Korean companies that export to the United States, such as Hyundai Motor Co., which sent 1.1 million vehicles to America in 2024. Hyundai shares fell as much as 6.1 percent on the news today, but then pared losses amid expectations that Trump may not follow through with this threat.
Trump's announcement marks his latest move to ratchet up trade tensions with allies. In recent weeks, he has threatened to raise duties on Canadian products to 100 percent if Ottawa signs a trade deal with China and to slap new charges on European countries' goods over his quest to seize control of Greenland. The president has also said he would place tariffs on imports from countries doing business with Iran in an effort to pressure Tehran over anti-government protests.
Still, many of Trump's tariff threats have been scaled back or reversed. Data compiled by Bloomberg shows that about 27 percent of such threats since late 2024 were fully executed, with the share that remained in place lower at around 20 percent.
South Korea has been lauded as a model ally by the United States for raising its defense spending to 3.5 percent of gross domestic product (GDP), but tensions remain over the pace at which Seoul provides investment to the United States under its earlier trade deal and regulations seen to be inhibiting U.S. digital commerce firms. There's also a lack of clarity over an agreement to help with U.S. shipbuilding, the construction of nuclear submarines, and the provision of nuclear fuel for submarines.
Following last year's trade deal announcement, a domestic bill called the "special law on strategic investment with the U.S." was introduced to the South Korean parliament in late November, triggering a retroactive cut in U.S. auto tariffs, from 25 percent to 15 percent. Once passed, it will give South Korea's government the legal authority to manage and carry out the large-scale investments it pledged to the U.S. under the trade deal, but it hasn't been put on the fast track for approval for now.
A Bloomberg report last week said Seoul would hold off this year on implementing the annual pledge for investment in the United States, which was part of the trade deal framework, amid concerns over capital outflows and currency volatility. Finance Minister Koo Yun Cheol subsequently said the government was not intentionally delaying the investment, but was still in the process of selecting projects and completing required procedures. He said it would be difficult for the funds to be allocated in the first half of the year given the time needed to identify sites, finalize designs, and carry out approvals.
.What Bloomberg economists say..."Until now, the government and ruling party have played it slow, wary that a $350 billion investment fund could rattle the FX market and intensify won weakness. With U.S. tariffs suddenly the more proximate danger, they are likely to switch from caution to action—making a February passage window increasingly realistic."— Hyosung Kwon, economist, and Adam Farrar, analyst |
South Korea's presidential Blue House said it hasn't yet received any formal notification or detailed explanation from the United States regarding Trump's post on Truth Social. Industry Minister Kim Jung-kwan plans to travel to the U.S. as soon as possible to discuss the matter with Commerce Secretary Howard Lutnick, it said. Trade Minister Yeo Han-koo is also expected to visit the U.S. soon for talks with U.S. Trade Representative Jamieson Greer.
Officials from relevant ministries held a meeting Tuesday with senior aides from the Blue House to review progress on proposed special legislation as part of follow-up measures to Trump's announcement, presidential spokesperson Kang Yu-jung said. "Any tariff increase would require administrative steps, including publication in the Federal Register, to take effect, and our government plans to convey its commitment to implementing the tariff agreement to the U.S.," Kang said in a statement.
The United States is Korea's second-largest export destination after China, accounting for over 17 percent of outbound shipments, worth $122.9 billion last year. The Office of the U.S. Trade Representative said the U.S. ran a $66 billion trade deficit with Korea in 2024, its eighth-largest bilateral gap. While China remained South Korea's top export market in 2025, Seoul ran a far larger trade surplus with Washington than Beijing.
When the investment bill was submitted in November, Huh Young, the senior policy floor leader of the ruling Democratic Party, said parliament was not considering putting the bill on a fast-track process, hinting at some of the domestic concerns over the deal.
"If there are any provisions that could potentially undermine the national interest, we hope the ruling and opposition parties will put their heads together to ensure the bill passes as a more complete piece of legislation governing investment in the U.S.," Huh told reporters on November 26.
Since the bill's submission, deliberations have stalled in the National Assembly as the main opposition People Power Party calls for ratification of the tariff deal before passage of the special law. Finance Minister Koo plans to meet with the head of parliament's finance committee to seek cooperation on the legislation, his office said.
The latest threat is consistent with Trump's standard approach to trade, in which agreements often remain subject to change, according to Peter Kim, managing director at KB Securities in Seoul. He said South Korea's delayed implementation reflects the typical pace of its legislative process rather than any intentional strategy.
"Tariff headlines may keep stock prices volatile in the near term, but further pullbacks may be limited,"said Jung In Yun, CEO at Fibonacci Asset Management Global. "For me, any pullback will likely be a sentiment-driven dip, not a structural issue. Korea's key exporters remain globally competitive and capable of adapting supply chains."
Beyond the investment legislation, the Unted States has also voiced concerns over South Korea's handling of digital regulation, citing what they see as disproportionate scrutiny of U.S.–linked technology firms amid a high-profile data breach at Coupang Inc. The issue has added to broader friction between Washington and Seoul over market access and regulatory treatment in the digital sector in recent months.
"If South Korea responds promptly by accelerating the process, there is a high probability that the tariffs will be swiftly lowered again," said Ha SeokKeun, chief investment officer at Eugene Asset Management Co. "Since both nations desire this outcome, the impact of this news on the domestic stock market is expected to be limited, provided no extraordinary external variables arise."
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