A $450-billion package of investments in US projects such as shipbuilding, nuclear power, energy, chips, and a range of other sectors has helped South Korea win a sizeable tariff cut.
The US will charge a 15% tariff on imports from South Korea, US President Donald Trump announced on Wednesday, a rate that is down from a threatened 25%.
South Korea agreed to invest $350 billion in the United States in projects selected by Trump and to purchase energy products worth $100 billion, Reuters said, adding that the agreement eases tensions with a key ally in Asia, as well as one of America’s top-10 trading partners.
ALSO SEE: Trump Says India Will Face 25% Tariff, Penalty From August 1
The arrangement, revealed after Trump met with Korean officials at the White House, came during a blizzard of trade policy announcements. Many countries are rushing to cut deals ahead of August 1, when Trump has promised higher tariffs will kick in.
“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 eliminated uncertainty and set US tariffs lower than or at the same level as major competitors.
“We have crossed a big hurdle,” Lee said in a Facebook post. Trump said Lee would visit the White House “within the next two weeks” for his first meeting with the US president.
South Korea will accept American products, including autos and agricultural goods into its markets and impose no import duties on them, Trump added.
South Korea’s top officials said the country’s rice and beef markets would not be opened further, and discussions over US demands on food regulations continue.
Seoul appeared to have defended its non-tariff barriers while keeping its tariff rate on par with Japan and the European Union, Citi economist Kim Jin-wook said.
“While the headline figure looks like a huge win for the US, details appear to be favourable for South Korea,” he said.
$150 billion for shipbuilding partnership
South Korea seems to have avoided the worst, agreed Cheong In-kyo, a former South Korean trade minister. But he also said opinions about the deal could change if the $350 billion was not well spent.
It was not clear what the investment would involve, where the financing would come from, over what timeframe deals would be implemented and to what extent their terms would be binding. Trump said additional South Korean investments would be announced later.
Of the total, $150 billion is aimed at a shipbuilding partnership, while $200 billion would include chips, nuclear power, batteries, and biotechnology, Kim Yong-beom, the South Korean presidential office’s policy chief, told a briefing.
He said “ambiguity is good,” while adding that negotiators had ensured there would be safeguards over how the funds were used.
Existing investment plans by South Korean companies would be part of the fund, according to another presidential official.
US Commerce Secretary Howard Lutnick said in a post on X that 90% of the profits from the $350 billion fund were “going to the American people.”
Kim said South Korea understands that to mean that some profits could be reinvested.
Energy purchases over 3.5 years
The energy purchases would include LNG, LPG, crude oil, and a small amount of coal, he added.
“This is within our usual import volume,” he said, noting 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 tariff rate on South Korean autos would also be 15%, Lutnick said, which is down from the current rate of 25%.
Lutnick also said semiconductor and pharmaceutical exports would not be treated more harshly than those from other countries. Steel, aluminum, and copper were not covered by the new deal.
Rush by new leader
South Korea is one of three Asia-Pacific countries that had a comprehensive free trade agreement with the United States, but that did not spare it from new tariffs.
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 trying to impose martial law.
Pressure on negotiators increased after Japan clinched its deal earlier this month.
South Korea has been a particular target of Trump for its trade surplus and the cost of maintaining some 28,500 US 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% from a year earlier.
South Korean companies welcomed the deal, saying it would reduce uncertainty.
Amid the last-minute push to reach a tariff agreement, Samsung Electronics inked a $16.5 billion chip deal with Tesla. LG Energy Solution also signed a $4.3 billion deal to supply Tesla with energy storage system batteries, a person familiar with the matter said.
Reuters with additional editing by Jim Pollard
ALSO SEE:
Tariffs Spur Big Tesla Deals With LGES Batteries, Samsung Chips
EU Strikes a Pricey Deal With Trump to Avert a Trade War
CK Hutchison Ports Deal Deeply Entangled in US-China Trade War
Nikkei Jumps After Trump Strikes 15% Tariff Deal With Japan
India’s Modi Shows His Preference: a Free-Trade Pact With Britain
Vietnam to Ramp up Inspection of Chinese Goods After Trump Deal
China Fears Negative Impacts of US Trade Pact With Vietnam
Indonesia to Sign $34 Billion Pact With US Ahead of Tariff Deadline
Trump Plan to Revive US Shipbuilding, Cut Chinese Grip on Sector
US Probe Shows China Unfairly Dominates Shipbuilding: Sources
