President Donald Trump said on Wednesday the U.S. will charge a 15% tariff on imports from South Korea, down from a threatened 25%, as part of a deal that eases tensions with a top-10 trading partner and key Asian ally.
The arrangement, announced shortly after Trump met with Korean officials at the White House, came during a blizzard of trade policy announcements ahead of a self-imposed August 1 deadline.
That is when Trump has promised higher tariffs will kick in on U.S. imports from a range of countries. Imports from South Korea, a powerhouse exporter of computer chips, cars and steel, faced a 25% rate prior to Wednesday’s last-minute deal.
“I am pleased to announce that the United States of America has agreed to a Full and Complete Trade Deal with the Republic of Korea,” Trump wrote on Truth Social.
The negotiations were an early test for South Korean President Lee Jae Myung, who took office in June after a snap election. He said the deal had eliminated uncertainty in the export environment and set U.S. tariffs lower than or at the same level as major competitors.
“We have crossed a big hurdle,” Lee said in a post on Facebook. Trump said Lee would visit the White House “within the next two weeks” for his first meeting with the U.S. president.
South Korea agreed to invest $350 billion in the United States in projects selected by Trump and to purchase $100 billion in energy products, the U.S. president said.
He also said South Korea would accept American products, including autos and agriculture into its markets and impose no import duties on them.
South Korea’s top officials said the country’s rice and beef markets would not be further open, and that discussions over U.S. demands on food regulations continue.
“We avoided the worst and chose the next best,” said Cheong In-kyo, a former South Korean trade minister. Much will depend on how the investments to the U.S. are structured, he added.
“Depending how and where $350 billion will be spent, this fund will be looked at differently.”
DEVIL IN THE DETAILS
It was not immediately clear how the investment deals would be structured, where the financing would come from, over what time frame they would be implemented and to what extent their terms would be binding. Trump said additional South Korean investments would be announced later.
Of the $350 billion fund, $150 billion was aimed at a shipbuilding partnership while $200 billion would include chips, nuclear power, batteries, and biotechnology, Kim Yong-beom, policy chief from the South Korean presidential office, told a briefing.
Existing investment plans by South Korean companies would be part of the fund, according to Kim.
He said that “ambiguity is good”, but noted that they had ensured there would be safeguards over how the funds were used.
U.S. Commerce Secretary Howard Lutnick declared in a post on X that 90% of the profits from the $350 billion fund were “going to the American people.”
Kim said that South Korea understands it to mean that profits would be reinvested.
The energy purchases would include LNG, LPG, crude oil, and a small amount of coal, Kim said.
“This is within our usual import volume,” he said, adding that it might lead to a “slight shift” in the country’s mix of imports from the Middle East to more American sources.
Lutnick said the energy purchases would happen “over the next 3.5 years.”
The U.S. tariff rate on South Korean autos would be set at 15% and the country’s semiconductor and pharmaceutical exports would not be treated more harshly than those from other countries, Lutnick said. Steel, aluminum, and copper were not covered by the new deal.
SCRAMBLE IN SOUTH KOREA
The negotiations took place in a turbulent political environment in South Korea with former President Yoon Suk Yeol removed in April after he was impeached for an attempt to impose martial law.
South Korea has been a particular target of Trump for its trade surplus as well as the cost to maintain some 28,500 U.S. troops in the country to defend against North Korea.
Last year South Korea posted a record $55.7 billion trade surplus with the United States, up 25.4% from a year earlier.
It is among only three Asia-Pacific countries that already had a comprehensive free trade agreement with the United States, but that did not spare it from new tariffs.
Pressure had been mounting on South Korea since Japan clinched a deal to cut Trump’s threatened tariffs to 15% earlier this month.
Amid the last-minute push by government officials to reach a tariff deal, South Korea’s Samsung Electronics inked a $16.5 billion chip deal with Tesla.
South Korean battery maker LG Energy Solution also signed a $4.3 billion deal to supply Tesla with energy storage system batteries, a person familiar with the matter told Reuters.
(Reuters)