Trump Announces Sharp Tariff Hike on South Korean Imports
Former US President Donald Trump has declared his intention to significantly increase tariffs on goods imported from South Korea, sending shockwaves through financial markets and diplomatic circles. In a social media post, Trump stated that tariffs on key South Korean exports, including automobiles, lumber, and pharmaceuticals, would rise from 15% to 25%.
Accusations of Trade Deal Non-Compliance
The proposed tariff escalation stems from Trump's accusation that South Korea is not fulfilling its obligations under a historic trade agreement negotiated last year. He specifically pointed to the Korean Legislature's failure to enact the deal, asserting that this constitutes a breach of the agreement. "South Korea's Legislature is not living up to its Deal with the United States," Trump remarked, though formal notices to implement these changes have yet to be issued by his administration.
South Korea's Response and Diplomatic Moves
South Korea's presidential office has responded with surprise, indicating that it received no prior notification about the tariff hike plans. In an official statement released on Tuesday, the office announced that Trade Minister Kim Jung-kwan, currently in Canada, will travel to Washington for urgent discussions with US Commerce Secretary Howard Lutnick. This development underscores the sudden and unexpected nature of Trump's announcement.
Background of the US-South Korea Trade Agreement
Trump's latest threat represents a stark reversal from the trade and security deal finalised in October last year, following tense negotiations between Washington and Seoul. The agreement, which included investment pledges from South Korea and tariff reductions by the US, was celebrated as a diplomatic achievement. However, it has since languished in a legal grey area in South Korea, with Seoul's presidential office arguing in November that parliamentary approval was unnecessary as it was a memorandum of understanding, not a binding legal document.
Immediate Market Impact and Auto Industry Concerns
The announcement had an immediate and severe impact on South Korean financial markets, particularly affecting the automobile sector. Shares in several major South Korean carmakers plummeted by as much as 5% in the minutes following Trump's statement. This reaction is highly significant given that the auto industry accounts for 27% of South Korea's exports to the US, with nearly half of the country's car exports destined for American markets.
Broader Context of Trump's Tariff Policies
This move against South Korea is part of a broader pattern of tariff threats employed by Trump during his second term as a tool of foreign policy. Over the weekend, he warned Canada of potential 100% tariffs if it proceeds with a trade deal with China, and earlier in January, he threatened European nations with tariffs related to Greenland. Economists have expressed concerns about this approach, noting its potential to destabilise global trade and create market volatility.
Expert Analysis and Future Implications
Josh Lipsky, Chair of International Economics at the Atlantic Council, commented that Trump's action reflects growing impatience with the slow pace of Seoul's implementation of the trade framework. "It's just another reminder that the markets were wrong to believe we were going to get into tariff stability in 2026," Lipsky observed. He emphasised that while Trump doesn't always follow through on threats, the mere volatility they create carries significant economic costs.
The situation remains fluid, with South Korean officials preparing for crucial talks in Washington while markets continue to react to the uncertainty. The outcome of these discussions could have profound implications for US-South Korea trade relations and the global automotive industry.
