Trump’s tariff move challenges Korea-U.S. trade agreement

In a surprising move on Jan. 27, U.S. President Donald Trump announced plans to raise tariffs on South Korean goods, including automobiles, lumber, and pharmaceuticals, to 25 percent. This decision effectively overturns the previous South Korea-U.S. tariff agreement, which had reduced the rate to 15 percent last year. Trump’s criticism of the South Korean legislature, which he claimed failed to codify the trade deal into law, reflects deeper frustrations with the legislative process in Seoul.

The legislation in question, known as the special act on investment in the United States, was designed to implement South Korea’s commitment to invest $350 billion in the U.S. in exchange for tariff reductions. Introduced in November of the previous year, the bill was supposed to pave the way for retroactive tariff reductions. Yet, the bill remains pending, and Trump’s sudden announcement of the tariff hike complicates an already delicate situation.

While the agreement stipulated that tariffs would be reduced retroactively, it did not set a firm deadline for the bill’s passage. Despite no official complaints from U.S. working-level officials about legislative delays, Trump’s unilateral tariff increase reflects a tension that goes beyond mere policy disagreements.

Trump did not specify when the higher tariffs would take effect. If the United States reinstates elevated auto tariffs, Hyundai Motor and Kia estimate that they would incur additional annual costs of about 8 trillion won. Such a slowdown in automobile exports could undermine South Korea’s economic recovery. The Trump administration has also threatened further tariffs on semiconductors, South Korea’s largest export, raising the stakes even higher. In the worst-case scenario, both semiconductors and automobiles, the country’s top export items, could be affected by these tariff hikes. Thus, it is imperative that both the government and the National Assembly work diligently to prevent these tariff risks from materializing.

The ruling Democratic Party of Korea has defended the delays in the legislative process, citing the complexity of tax deliberations in December and confirmation hearings in January. They assured that the bill will be reviewed once the mandatory consideration period concludes. With the exchange rate remaining volatile, it is crucial for South Korea and the United States to coordinate on the timing of investment implementation. Nonetheless, any perception that the National Assembly is stalling could provoke further U.S. retaliation.

The government stated that it received no prior official notice of Trump’s tariff announcement, raising questions about the effectiveness of follow-up procedures and monitoring developments in Washington. If the ruling and opposition parties begin a blame game over these delays, public confidence may erode, and negotiating leverage could weaken. With Trump heading into the November midterm elections, it is vital for both the government and the National Assembly to avoid providing any pretexts for renewed trade tensions.