Trump Raises South Korea Tariffs to 25% to Pressure Investment Bill Passage
Updated (2 articles)
Tariff Increase Announced and Immediate Market Reaction President Donald Trump posted that tariffs on Korean automobiles, lumber and pharmaceuticals will rise from 15 % to 25 % — a reversal of the July‑October pact — without prior diplomatic notice, prompting a sharp intraday dip in South Korea’s stock market, led by auto‑related shares [1][2]. He framed the move as a response to the Korean National Assembly’s failure to complete required legal steps for the bilateral deal [1][2]. The announcement targeted a domestic U.S. audience and raised immediate investor anxiety about sudden trade‑policy shifts [1][2].
Rationale Tied to Unpassed Investment Bill Trump argued the tariff hike is intended to force Seoul to approve a special bill supporting its US$350 billion investment pledge, which remains stalled in the National Assembly [2]. Analysts note the pressure aims to secure the $20 billion annual Korean investment already agreed for this year and to pre‑empt a pending U.S. Supreme Court ruling that could invalidate reciprocal tariffs [1][2]. The move leverages trade leverage to extract a concrete legislative commitment from South Korea [2].
Broader Political Context Influencing Decision Experts link the tariff action to Trump’s domestic criticism over immigration, ambitions regarding Greenland, and rising tensions with the EU and Canada [2]. Seoul’s ongoing digital‑regulation probe of Coupang and a U.S. letter urging compliance with a nondiscrimination provision for U.S. Big Tech add further pressure, suggesting the tariff is part of a wider strategy to address multiple grievances [1][2]. Prime Minister Kim Min‑seok highlighted a new diplomatic “hotline” with Washington as a parallel confidence‑building measure [1].
South Korean Government Response An emergency inter‑agency meeting, led by chief of staff Kim Yong‑beom, was convened to formulate a coordinated reply [2]. Industry Minister Kim Jung‑kwan plans talks in Washington with U.S. Commerce Secretary Howard Lutnick, while Prime Minister Kim Min‑seok raised the Coupang issue with Vice President JD Vance [2]. President Lee Jae Myung urged a measured, interest‑based response, warning against emotional reactions that could cloud policy decisions [1].
Sources
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1.
Yonhap: Trump threatens to reverse Korea‑U.S. tariff pact, raising market concerns: details the abrupt tariff threat, brief market slide, Trump’s justification citing legislative shortfall, establishment of a diplomatic hotline, and President Lee’s call for a measured response .
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2.
Yonhap: Trump Raises South Korea Tariffs to 25% Amid Push for Investment Bill: emphasizes the tariff raise as pressure for the $350 billion investment bill, cites Supreme Court urgency, broader domestic and international anxieties, the Coupang digital‑regulation probe, and outlines Seoul’s emergency diplomatic actions .
Timeline
Oct 2025 – The United States and South Korea finalize a bilateral trade deal that sets reciprocal tariffs at 15 % on automobiles, lumber and pharmaceuticals, laying groundwork for a $20 billion annual Korean investment pledge in the U.S. [1][2]
July 2025 – Korea and the United States reach an initial tariff pact, later reaffirmed in November, establishing a framework for reduced duties and investment cooperation. [1]
Nov 2025 – The July tariff pact is reaffirmed by both governments, confirming the 15 % tariff level and the $20 billion investment target for 2026. [1]
2025 (earlier) – South Korea launches a digital‑regulation probe into Coupang after a massive data‑leakage incident, drawing criticism from Washington and adding tension to the trade relationship. [2]
Jan 1, 2026 – President Lee Jae‑Myung holds a New Year’s press conference, urging a measured, interest‑based response to U.S. semiconductor‑tariff pressure and warning against emotional reactions. [1]
Mid‑Jan 2026 (≈Jan 13) – The United States, via its acting ambassador, sends a formal letter to Seoul demanding compliance with a nondiscrimination provision for U.S. Big Tech, signalling growing grievances. [1]
Jan 25, 2026 – President Donald Trump posts on social media that U.S. tariffs on Korean automobiles, lumber and pharmaceuticals will rise from 15 % to 25 %, claiming the Korean National Assembly has not completed required legal steps and framing the move as pressure to secure a special investment bill supporting Korea’s $350 billion pledge. [1][2]
Jan 26, 2026 – South Korea’s stock market experiences a sharp intraday decline, led by auto‑related shares, as investors react to the announced tariff increase; the dip proves brief but underscores market sensitivity to sudden trade‑policy shifts. [1]
Jan 27, 2026 – Prime Minister Kim Min‑seok highlights a newly established U.S.–Korea diplomatic “hotline” after meeting Vice President JD Vance in Washington, presenting it as a key achievement amid escalating trade tensions. [1]
Jan 27, 2026 – South Korean chief of staff Kim Yong‑beom convenes an emergency inter‑agency meeting to formulate a diplomatic response, while Industry Minister Kim Jung‑kwan schedules talks in Washington with U.S. Commerce Secretary Howard Lutnick, and Prime Minister Kim Min‑seok plans to raise the Coupang issue with Vice President Vance. [2]
2026 (future) – A pending U.S. Supreme Court ruling on the legality of reciprocal tariffs looms, creating urgency for Seoul to secure a firm commitment before the court potentially strikes down the 15 % tariff framework. [1][2]
2026 (planned) – The South Korean National Assembly is expected to consider a special investment bill that would lock in $20 billion of annual Korean investment in the United States, a legislative step that Trump’s tariff threat aims to accelerate. [1][2]