South Korea and U.S. Trade Talks Intensify Amidst Tariff Threats

A Hyundai Steel plant in Dangjin, South Korea, is shown in a photograph from June 15, 2011.

South Korea announced its intention to increase trade discussions with the United States. The country viewed U.S. President Donald Trump's plan for a 25% tariff, effective August 1, as an extension of a grace period for implementing reciprocal tariffs.

U.S. Secretary of State Marco Rubio stated that the new deadline, as outlined by Trump in a letter to South Korean President Lee Jae Myung, provided time for the two nations to reach an agreement. Trump had previously indicated his intention to impose the tariff on South Korean goods starting August 1.

South Korea's Industry Ministry released a statement indicating that the letter effectively extended the grace period on reciprocal tariffs. The ministry stated its plan to intensify negotiations to achieve a mutually beneficial outcome and resolve tariff-related uncertainties. They also planned to use this as an opportunity to improve domestic systems and address the trade deficit, a key concern for the United States, and to advance key industries through a manufacturing partnership.

South Korea achieved a record trade surplus of $55.6 billion with the U.S. in 2024, a 25% increase from the previous year, driven by increased car exports. Trump, in his letter to Lee, stated that the relationship had been "far from reciprocal" and invited South Korea to propose opening its markets and eliminating trade barriers.

Economists note that South Korea's effective tariff rates are near zero due to a free trade agreement initially signed in 2007 and revised in 2018. South Korea's trade envoy and presidential security advisor recently traveled to the United States for trade and defense talks.

National Security Advisor Wi Sung-lac met with Rubio in Washington to discuss the alliance and ongoing trade negotiations. They agreed that a summit between Lee and Trump would facilitate cooperation. Lee's office quoted Rubio as saying that while tariff letters were sent to major trading partners, including South Korea, there was still time to reach an agreement before the August 1 implementation date.

Trump also indicated a willingness to negotiate. When asked about the deadline's firmness, he stated it was "firm, but not 100% firm," and that he would be open to alternative solutions.

South Korea was initially slow to negotiate for an exemption from the tariffs, first agreeing to a package deal and then engaging in "technical discussions" before moving to high-level negotiations after Lee took office in June. Lee won a snap election after his predecessor's December martial law declaration, which he said had hindered the country's response to U.S. trade policy. The Industry Ministry acknowledged that it did not have sufficient time to reach an agreement with the United States on all issues despite intense negotiations.