Korea, U.S. finalize trade deal before deadline

South Korea and the United States struck a last-minute trade deal on July 31, narrowly avoiding the implementation of new tariffs that were scheduled to begin the following day. Under the agreement, the United States will reduce reciprocal and automotive duties from 25 percent to 15 percent. In return, South Korea will invest $350 billion in the U.S. economy, including $100 billion in liquefied natural gas and other energy imports over the next four years.

At a briefing, Presidential Policy Chief Kim Yong-beom said said the 25 percent tariffs scheduled for Aug. 1 would be reduced to 15 percent, including those on automobiles, one of South Korea’s leading exports.

The agreement includes a $150 billion shipbuilding fund under the “MASGA” (Make American Shipbuilding Great Again) initiative and a separate $200 billion fund to support Korean companies expanding in the United States. Proposals to open South Korea’s agricultural market, including for rice and beef, which were key U.S. demands, were left out of the final terms.

President Lee Jae-myung said the deal creates conditions to compete with major economies on equal or better terms. He added that it aligns U.S. efforts to revitalize manufacturing with Korea’s push to strengthen its competitiveness in the American market.

Following the agreement, Korean exporters to the United States will face the same 15 percent tariff rate applied to Japanese and European Union goods, easing uncertainty. However, while Japan and the EU previously paid only 2.5 percent on vehicles, Korean automakers had benefited from zero tariffs under the Korea-U.S. Free Trade Agreement. That advantage is now gone with the uniform 15 percent rate.

“We made a strong case for a 12.5 percent auto tariff,” Kim said. “But the FTA has now been severely weakened.”


윤다빈 empty@donga.com