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South Korea reassures on US investment pledge after Trump threatens to hike tariffs
South Korea scrambled on Tuesday to assure the U.S. it remained committed to implementing a trade deal after President Donald Trump said he would hike tariffs on autos and other imports from its ally, blaming a delay in enacting the pact agreed last year.
Trump said on Monday that South Korea's parliament was not living up to its side of the deal by swiftly enacting the agreement he reached with President Lee Jae Myung to make huge investments in U.S. business projects in return for tariff cuts.
For South Korea, the decision, which officials in Seoul said caught them by surprise, is the latest setback as it tries to navigate the alliance and trade partnership amid potential challenges to its security and financial stability posed by Trump's demands.
Trump and Lee struck a deal in principle last July for Seoul to make $350 billion of investments in the U.S., despite concerns over the impact of such a large outflow from Asia's fourth-largest economy.
"President Lee and I reached a Great Deal for both Countries on July 30, 2025 and we reaffirmed these terms while I was in Korea on October 29, 2025," Trump wrote on social media.
Trump said South Korea's legislature had not enacted the deal and as a result: "I am hereby increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%."
It was not immediately clear when the hike would take effect. A source familiar with internal discussions between the countries said Trump may have been prompted by recent South Korean regulatory actions against Coupang (CPNG.N), opens new tab, a U.S.-listed e-commerce company that has protested them as unfair and discriminatory.
The countries have been in talks to address Washington's concerns about regulations on U.S. tech firms as part of the trade deal.
South Korea's presidential Blue House said it was committed to implementing the deal and would continue to take the required steps to finalise it to stave off tariff hikes.
Lee's chief policy aide convened an emergency meeting with officials and the industry minister, currently in Canada, would visit the U.S. soon and meet with Secretary of Commerce Howard Lutnick, the Blue House said.
A top trade envoy will also visit Washington soon to meet U.S. Trade Representative Jamieson Greer, it added.
The White House and Greer's office did not respond to requests for comment.
South Korea's ruling Democratic Party said five bills that would enact the U.S. investment are now pending committee review and with backing from the opposition, parliament should be able to speed up their passage. It did not give a timeline for the vote.
South Korea's benchmark KOSPI index fell 1.19% before reversing early losses to trade 2.2% higher, while the won weakened 0.5% against the dollar.
Trump has upended global trade by imposing tariffs on imports from nearly every country since beginning his second term in office in 2025. In some cases, he has threatened tariff hikes and delayed them or not followed through.
Choi Seok-young, a former South Korean trade negotiator, said Trump's tariff hike threat could be seen as "a political move in which the United States is exerting maximum pressure on South Korea in an effort to force concessions during the ongoing negotiations over non-tariff barriers."
EXPORTS TO U.S. FALL IN 2025
South Korea's exports hit a record $709.4 billion in 2025, up 3.8% from 2024. U.S.-bound shipments stood at $122.9 billion, down 3.8% but still making it the second-biggest market after China.
Auto exports to the U.S. stood at $30.2 billion, accounting for 25% of the total U.S. shipments, the biggest of any South Korean sector, but down 13.2% from 2024.
After last year's agreement, Washington and Seoul set tariffs on U.S. imports of Korean autos and auto parts at 15%, down from 25%, matching their Japanese competitors. The 15% rate took effect on November 1.
Higher tariffs would hit South Korean automaker Hyundai Motor (005380.KS) and its affiliate Kia (000270.KS)
particularly hard. Shares in Hyundai and Kia were 0.4% and 1.7% lower respectively as of 0508 GMT, after steeper falls in earlier trade.
Hyundai did not respond to a request for comment.
General Motors (GM.N) which produces about 500,000 vehicles annually in South Korea and exports most of them to the U.S., also did not comment.
CURRENCY CONCERNS
Under the deal struck last year, South Korea committed to pay $200 billion of the $350 billion in cash in phased installments capped at $20 billion a year in an effort to maintain won stability.
Earlier this month, South Korea's Finance Minister Koo Yun-cheol told Reuters the government planned to implement the investment package as soon as possible, while noting that uncertainty over a U.S. Supreme Court ruling on Trump's tariffs expected soon could affect the process.
He said the planned investment of $350 billion was unlikely to kick off in the first half of 2026, given the weak won.
The prospect of large currency outflows has caused headaches for authorities in Seoul at a time when the won has slumped to trade at levels unseen since the global financial crisis from 2007 to 2009.
[Source: Reuters]
