Trump increases tariffs on South Korean autos, goods amid trade deal delays
In a bold pivot on trade policy, President Trump has revealed plans to elevate tariffs on South Korean vehicles and various imports by a whopping 10%, raising them from 15% to 25%. This escalation follows reports of procrastination in the South Korean parliament regarding a pre-negotiated trade agreement.
President Donald Trump announced on Monday that he is increasing tariffs on U.S. imports of South Korean autos and other goods, citing the South Korean legislature's delay in enacting a trade deal agreed upon last year. This decision, which reportedly surprised officials in Seoul, represents a significant challenge for South Korea as it navigates its alliance and trade partnership with the United States amidst potential security and financial stability concerns stemming from Trump's demands. The tariff hike is set to raise rates from 15% to 25% on a range of products including autos, lumber, and pharmaceuticals.
Trump stated that he and South Korean President Lee Jae Myung had reached a significant deal on July 30, 2025, and reaffirmed these terms during his visit to Korea on October 29, 2025. However, he indicated that the South Korean legislature had not yet enacted the agreement.
"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.
As a consequence of this perceived inaction, Trump declared his intention to increase tariffs.
"I am hereby increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%."
The exact effective date for these increased tariffs was not immediately specified. A source familiar with internal discussions between the two nations suggested that recent South Korean regulatory actions against Coupang, a U.S.-listed e-commerce company, might have prompted Trump's announcement. Coupang had protested these regulations, deeming them unfair and discriminatory. The ongoing trade talks between the U.S. and South Korea have included discussions aimed at addressing Washington's concerns regarding regulations affecting American tech firms.
Choi Seok-young, a former South Korean trade negotiator, characterized Trump's statement as a potential political maneuver.
"Trump's message 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.'"
The South Korean stock market experienced initial volatility following the announcement. The benchmark KOSPI index fell by 1.19% before reversing its losses to trade 1.3% higher. The South Korean won weakened by 0.5% against the U.S. dollar.
The White House and the U.S. Trade Representative's office did not immediately provide comments when requested.
South Korea's presidential Blue House indicated that the industry minister, who was in Canada at the time, would soon visit the U.S. to meet with Secretary of Commerce Howard Lutnick. The Blue House also stated that they had not received official notification regarding the U.S. tariff hikes. However, a South Korean presidential adviser was scheduled to meet with relevant ministries to discuss potential measures.
A spokesperson for South Korea's ruling Democratic Party offered no immediate comment. The country's parliament was slated to commence a new session on February 3, a period when bills are typically brought forward for votes.
President Trump has previously implemented tariffs on goods from numerous countries since beginning his second term in office in 2025. In some instances, he has threatened tariff increases, only to delay or not follow through with them.
South Korea's exports reached a record $709.4 billion in 2025, marking a 3.8% increase from 2024. Shipments to the United States amounted to $122.9 billion, a decrease of 3.8%, though the U.S. remains the second-largest market for South Korean exports after China.
Automotive exports to the U.S. totaled $30.2 billion, representing 25% of all South Korean shipments to the U.S. and making it the largest sector for exports to that market. However, this figure was down 13.2% compared to 2024.
Following the agreement reached by the leaders last year, Washington and Seoul had set tariffs on U.S. imports of Korean autos and auto parts at 15%, a reduction from the previous 25%. This rate brought them in line with tariffs on Japanese competitors. The 15% rate had become effective on November 1.
The prospect of higher tariffs would significantly impact South Korean automakers Hyundai Motor and its affiliate Kia. Their shares initially fell by 4.8% and 6%, respectively, before recovering to trade 0.4% higher and 1.2% lower. Hyundai did not immediately respond to a request for comment. General Motors, which produces approximately 500,000 vehicles annually in South Korea and exports most of them to the U.S., also did not immediately comment.
Under the terms of the trade deal struck last year, South Korea committed to investing $350 billion in U.S. strategic sectors. Of this amount, $200 billion was to be paid in cash through phased installments, capped at $20 billion annually, with the aim of maintaining won stability.
Earlier in January, South Korea's Finance Minister Koo Yun-cheol informed Reuters that the government intended to implement the investment package as soon as possible. He also noted that uncertainty surrounding a forthcoming U.S. Supreme Court ruling on Trump's tariffs could affect this process. Koo indicated that the planned $350 billion investment was unlikely to commence in the first half of 2026, partly due to the weak performance of the South Korean won.
The potential for large currency outflows has presented challenges for authorities in Seoul, particularly as the won has depreciated to levels not seen since the global financial crisis of 2007-2009. South Korea's finance ministry announced on Tuesday that it would actively engage in consultations with parliament regarding the U.S. investment bill. Minister Koo was already planning to seek parliamentary cooperation on the matter that same afternoon, according to the ministry.
Josh Lipsky, chair of international economics at the Washington-based Atlantic Council, suggested that Trump's action reflects his impatience with the pace of Seoul's implementation of the trade agreement framework. He also highlighted the ongoing uncertainty surrounding tariff rates.
"It's just another reminder that the markets were wrong to believe we were going to get into tariff stability in 2026."