US President Trump threatened to raise tariffs on South Korean imports—including automobiles, lumber, pharmaceuticals, and other goods—by increasing reciprocal tariffs to 25% from 15%. This is on account of South Korea’s parliament not yet passing the US–South Korea trade deal reached in July 2025.
If implemented, the higher tariffs would erode South Korean exporters’ competitiveness in the US market, particularly for automakers relative to Japanese peers. This comes as South Korea’s exports to the US have only recently stabilized, returning to marginally positive growth of 3.7% y/y in December 2025 following a sharp decline earlier in the year.
The development also raises concerns that South Korean semiconductor manufacturers may fail to secure preferential treatment under the upcoming Phase 2 semiconductor tariff framework, potentially placing them at a competitive disadvantage versus Taiwanese peers.
Separately, earlier media reports indicated that South Korea may delay the implementation of its USD 350bn investment commitment to the US, citing capital outflow pressures and persistent KRW weakness.
Market implications: Renewed uncertainty surrounding the South Korea–US trade deal clouds South Korea’s growth outlook, though it may ease near-term capital outflow pressures. US-listed Korea ETFs have reacted sharply negatively. Investors may also reassess the broader trajectory of South Korea–US relations, particularly against the backdrop of recently improving ties between South Korea and China.
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