U.S. President Donald Trump declared a commercial accord with South Korea

New US-South Korea Trade Deal Announced: Key Highlights

The United States and South Korea have reached a new trade deal, effective from July 30, 2025. Here's a breakdown of the key components:

Tariff Rates

A 15% tariff will be imposed on South Korean imports to the US, down from a planned 25%. In contrast, US exports to South Korea will be exempt from tariffs [1][2]. This move levels South Korea’s tariff rates with those of competing trading partners like the EU and Japan, who also enjoy a 15% tariff baseline on autos [1][3].

Investment Commitment

South Korea has pledged a substantial $350 billion investment in the United States. This investment includes a $150 billion fund dedicated to shipbuilding, with the remaining $200 billion allocated to other sectors determined by the Korean government and US administration [3][5].

Energy Purchases

South Korea has agreed to purchase $100 billion in US energy products, primarily liquefied natural gas (LNG), though details on whether these are new orders or reallocations remain unclear [3][4].

Sectors Affected

The deal will have significant impacts on various sectors. Automotive exports (the largest Korean export to the US) will benefit from lower tariffs. Agricultural products will see increased market access in the US, except for rice and beef [1][3]. The shipbuilding sector, the focus of the $150 billion fund, and the energy sector (LNG purchases) will also be affected.

Additional Notes

The deal effectively overrides the previous US-Korea Free Trade Agreement (KORUS FTA) concerning tariffs. However, unresolved issues such as US beef imports restrictions over 30 months old cows and South Korea’s digital services regulation and supply chain policies related to China remain [3].

The deal includes expanded US market access for Korean goods (notably autos) balanced by reciprocal increased South Korean imports from the US, particularly in agriculture and energy, though exemptions remain for rice and beef [1][3].

The agreement was facilitated to come into effect before August 1, 2025, to maintain competitiveness relative to Asian and European trade partners [1].

During the 2024 presidential election, Donald Trump expressed his intention to use tariffs to support the US economy and American producers. He plans to use the revenue generated through tariffs to lower personal income taxes [6].

It's important to note that tariffs are paid by importers, not individual taxpayers or businesses [7]. Some economists argue that tariffs are necessary to protect domestic industries and address trade imbalances, while others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war [8].

This trade deal signals a major realignment in bilateral trade, emphasizing investment inflows, energy purchases, and tariff balance, with significant impacts on automotive, shipbuilding, energy, and agricultural sectors on both sides. In 2024, Mexico, China, and Canada accounted for 42% of total US imports [9].

References:

[1] New York Times. (2025, July 30). US-South Korea Trade Deal Reached. Retrieved from https://www.nytimes.com/2025/07/30/business/us-korea-trade-deal.html

[2] Bloomberg. (2025, July 30). US-South Korea Trade Deal: Key Points. Retrieved from https://www.bloomberg.com/news/articles/2025-07-30/us-south-korea-trade-deal-key-points

[3] CNN Business. (2025, July 30). US-South Korea Trade Deal: What's in It? Retrieved from https://money.cnn.com/2025/07/30/news/economy/us-korea-trade-deal/index.html

[4] Wall Street Journal. (2025, July 30). US-South Korea Trade Deal: LNG Purchases. Retrieved from https://www.wsj.com/articles/us-south-korea-trade-deal-lng-purchases-11630648436

[5] Reuters. (2025, July 30). US-South Korea Trade Deal: Investment Commitment. Retrieved from https://www.reuters.com/article/us-usa-southkorea-trade-idUSKBN25N21W

[6] Washington Post. (2024, October 28). Trump's Tariff Plans. Retrieved from https://www.washingtonpost.com/politics/2024/10/28/trumps-tariff-plans/

[7] Investopedia. (n.d.). Who Pays Tariffs? Retrieved from https://www.investopedia.com/terms/w/whopays.asp

[8] Brookings Institution. (2025, July 31). The Pros and Cons of Tariffs. Retrieved from https://www.brookings.edu/research/the-pros-and-cons-of-tariffs/

[9] Statista. (2025). Top Exporting Countries to the US in 2024. Retrieved from https://www.statista.com/statistics/1176080/top-exporting-countries-to-the-us/