Seoul: South Korea's recent tariff agreement with the United States is expected to provide immediate relief to its export-driven economy. The deal, which aligns with agreements secured by major trading rivals, sets a 15 percent tariff on South Korean exports to the U.S., a significant reduction from the initially expected 25 percent. This agreement includes a commitment of $350 billion in South Korean investment in U.S. sectors such as shipbuilding and energy.
According to Yonhap News Agency, the agreement also reduces tariffs on automobiles from 25 percent to 15 percent and allows South Korea to avoid additional U.S. market access demands in sensitive sectors like beef and rice. This new arrangement is scheduled to take effect on Friday (U.S. time).
President Lee Jae Myung expressed relief, stating, "The agreement eliminates uncertainty in our export environment and creates conditions to compete on equal or better terms with major countries." Similar 15 percent tariff agreements were recently established between the U.S., Japan, and the European Union, whose export structures closely mirror that of South Korea.
Despite these favorable terms, experts predict the new tariff scheme may further dampen South Korea's exports to the U.S. in the short term. In the first half of the year, South Korean exports to the U.S. fell 3.7 percent on-year to $62.18 billion, with car exports plunging 16.8 percent and machinery sales dipping 16.9 percent.
Industry ministry official Seo Ga-ram noted, "Exports to the U.S. have continued to decline, with particularly steep drops in automobiles and steel, both subject to item-specific tariffs. Our trade surplus with the U.S. is also shrinking."
South Korea's overall exports slightly decreased by 0.03 percent from a year earlier in the first half of 2025 to $334.7 billion. However, officials attribute the better-than-expected figure to front-loaded demand ahead of anticipated tariff increases.
Economic growth concerns persist, as a potential slowdown in exports may further impact the domestic economy amid sluggish consumption. Lee Dong-won, an official at the Bank of Korea, warned, "Starting from the third quarter, the impact of U.S. tariffs is likely to become more pronounced. Economic growth may slow further under the 15 percent tariff scheme."
The Bank of Korea earlier projected the local economy to expand by 0.8 percent this year, following a 2 percent growth in 2024. The country's real gross domestic product (GDP) rose 0.6 percent in the second quarter, rebounding from a 0.2 percent contraction in the first quarter. The BOK is expected to release its latest growth outlook next month.
South Korean companies are assessing the impact of the new agreement amid concerns that the trade advantages under the KORUS FTA may have been nullified, particularly in the automotive sector. South Korean automobiles previously entered the U.S. market tariff-free under the KORUS FTA, while Japanese and European vehicles faced a 2.5 percent tariff.
Kim Yong-beom, the presidential chief of staff for policy, commented, "We pushed for 12.5 percent until the very end, but insisting on 12.5 percent would have destabilized other frameworks." He added that the FTA itself is already under strain.