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U.S. Lowers Tariffs on South Korean Imports in Major Trade Deal

 In a significant development aimed at easing trade tensions, U.S. President Donald Trump announced on Wednesday that the United States will impose a 15% tariff on imports from South Korea—down from the initially threatened 25%. The decision follows a high-stakes meeting between Trump and South Korean officials at the White House and is part of a broader flurry of trade policy announcements ahead of the President’s self-imposed August 1 deadline for increased tariffs on multiple nations.


“This is a Full and Complete Trade Deal with the Republic of Korea,” Trump declared on Truth Social, hailing the agreement as a win for both economies.

The revised tariff rate averts steep duties on South Korean exports such as semiconductors, automobiles, and steel, which had been facing a potential 25% hike. South Korea is among the United States' top ten trading partners and a critical Asian ally.

The deal represents an early diplomatic challenge for South Korean President Lee Jae Myung, who took office in June following a snap election. In a Facebook post, Lee said the agreement eliminates uncertainty and puts U.S. tariffs at or below the level imposed on South Korea’s global competitors. “We have crossed a big hurdle,” he noted. Trump added that President Lee is expected to visit Washington within the next two weeks.

$350 Billion Investment and Major Energy Purchases

As part of the agreement, South Korea has pledged to invest $350 billion in the United States, in projects selected in consultation with the Trump administration. Trump also announced a $100 billion commitment from South Korea to purchase American energy products, including liquefied natural gas (LNG), liquefied petroleum gas (LPG), crude oil, and a small volume of coal.

South Korean officials clarified that these energy purchases fall within the country’s usual import levels but will result in a “slight shift” in sourcing from Middle Eastern suppliers to the U.S. U.S. Commerce Secretary Howard Lutnick stated that these purchases will occur over the next 3.5 years.

According to Kim Yong-beom, policy chief in South Korea’s presidential office, $150 billion of the $350 billion fund will go toward a shipbuilding partnership, while the remaining $200 billion will support initiatives in semiconductors, nuclear power, batteries, and biotechnology. He noted that previously announced investment plans by South Korean firms will be counted as part of this fund.

While the structure and timeframe of the investment remain unclear, Kim said “ambiguity is good” and emphasized that safeguards would be in place to ensure the proper use of funds. U.S. officials, meanwhile, assert that 90% of the profits from the investment will “go to the American people,” a claim Kim interpreted to mean that profits would be reinvested within the U.S.

Trade Terms and Sectoral Impacts

Under the new deal, the U.S. will maintain a 15% tariff on South Korean automobiles. South Korean exports in semiconductors and pharmaceuticals will not face harsher treatment than those from other countries. However, the agreement does not include provisions for steel, aluminum, or copper, leaving those sectors outside the scope of the current deal.

South Korea confirmed that its sensitive rice and beef markets would not be further opened, and discussions are ongoing over U.S. demands related to food safety regulations.

Political Context and Business Deals

The trade negotiations took place amid political upheaval in South Korea, following the impeachment and removal of former President Yoon Suk Yeol in April over a failed attempt to impose martial law. The Trump administration has frequently targeted South Korea, citing its substantial trade surplus and the cost of maintaining approximately 28,500 U.S. troops on the Korean Peninsula.

In 2024, South Korea posted a record $55.7 billion trade surplus with the U.S.—a 25.4% increase year-on-year. Despite an existing free trade agreement between the two countries, South Korea was not spared from Washington’s new protectionist measures.

Pressure to finalize a deal intensified earlier this month after Japan secured a similar agreement to reduce threatened U.S. tariffs to 15%. In a parallel effort to demonstrate goodwill, South Korea’s Samsung Electronics signed a $16.5 billion chip supply deal with Tesla, while LG Energy Solution inked a $4.3 billion contract to supply Tesla with energy storage system batteries.

Looking Ahead

While the deal offers near-term relief and avoids an immediate trade escalation, analysts caution that much hinges on how the promised investments are executed. Former South Korean trade minister Cheong In-kyo remarked, “We avoided the worst and chose the next best. The perception of this fund will depend on how and where the $350 billion is spent.”

Further announcements on South Korean investments in the U.S. are expected in the coming weeks.

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