Recent US-South Korea Tariff Developments

By ariachiang

2026-01-27

U.S. President Donald Trump announced on January 26, 2026, that tariffs on South Korean automobiles, timber, pharmaceuticals, and other reciprocal products would be raised from 15% to 25%. Total tariffs imposed on South Korean exports to the United States reached USD 3.3 billion in the second quarter of 2025, surging 4,614% year over year and ranking highest among the United States’ top ten trading partners, signaling mounting tariff pressure. Following the announcement, Hyundai Motor shares fell as much as 4.77% intraday on January 26, South Korea’s KOSPI index declined up to 1.2% in early trading, and the Korean won depreciated by 0.7% against the U.S. dollar.

The tariff hike was primarily driven by South Korea’s National Assembly failing to approve the trade agreement reached with the United States on July 30 last year. Under the agreement, South Korea pledged USD 350 billion in investment in the U.S., including USD 200 billion in cash investment, in exchange for a tariff reduction to 15%. Trump criticized South Korea’s legislature on Truth Social for failing to honor the commitment. Although South Korean President Lee Jae-myung reaffirmed the agreement during his visit to the U.S. on October 29, prolonged legislative delays ultimately triggered U.S. retaliation. The incident highlights Trump’s trade policy emphasis on reciprocity and rapid execution, while domestic political divisions in South Korea stalled the legislative process and became the catalyst for the renewed tariff increase. In addition, South Korea’s heavy reliance on automobile and pharmaceutical exports to the U.S. made these sectors the primary targets of pressure, further intensifying bilateral trade frictions.

Looking ahead, in the short term, South Korea’s ruling party has pledged to pass a special bill by the end of February in an effort to resolve the impasse. However, if legislative delays persist, the 25% tariff could suppress South Korea’s export growth by 0.5–1% and exacerbate depreciation pressure on the Korean won. From a medium-term perspective, markets still expect the U.S.–South Korea agreement to eventually take effect, but Trump’s policy unpredictability is likely to raise trade risk premiums across the Asia-Pacific region, weighing on supply chain stability. For Taiwan, the episode serves as a warning of the need to accelerate legislative review of the Taiwan–U.S. trade agreement, as industries such as machine tools could otherwise face similar risks. Overall, fluctuations in U.S.–South Korea tariffs once again highlight the uncertainty surrounding the global trade environment in 2026, with further legislative developments remaining a key focus for investors.

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