Donald Trump has announced plans to increase tariffs on South Korean imports to 25%, effectively reversing tariff reductions granted just months ago under a trade agreement that Seoul’s legislature has yet to formally approve. The president’s social media declaration specifically called out South Korea’s parliament for failing to enact what he termed a “Historic Trade Agreement.”
The threatened tariff hike would particularly impact South Korea’s crucial automotive sector, which depends heavily on American consumers purchasing nearly half of all Korean car exports. The immediate market response saw significant volatility in Korean carmaker stocks, though losses were partially recovered as traders assessed the likelihood of Trump following through on the threat.
South Korea’s government maintains it was blindsided by the announcement and insists the October 2024 trade framework did not require legislative ratification. However, political reality is forcing a reassessment, with both ruling and opposition parties now committing to advance five bills that would enable the investments and other commitments Seoul made to Washington.
The dispute highlights fundamental disagreements about the legal status of the trade agreement negotiated between Trump and South Korean President Lee Jae Myung. While the Korean presidential office initially characterized it as a non-binding memorandum of understanding, Trump clearly expects full legislative implementation and is willing to use tariff pressure to achieve that outcome.
This latest tariff threat continues Trump’s pattern of wielding trade policy as a diplomatic weapon, following recent warnings to Canada about deals with China and to European nations regarding Greenland. Economists warn that the unpredictability of such announcements undermines business confidence and creates unnecessary market volatility with real economic consequences.