Global Economic Times

South Korea to Pursue Tariff Reductions Following Japan's Precedent with Large-Scale Investment in the US... Anticipating Turbulences in Trade Environment: Global Economic Times Reporter / Updated : 2025-07-24 11:59:32

The South Korean government is reportedly considering creating a fund for investment in the United States as a way to lower the 25% reciprocal tariff imposed by the US to 15%, similar to the Japanese case. This move follows Japan's recent agreement to invest $550 billion in the US, reducing reciprocal and automobile tariffs to 15%, and opening its agricultural markets (including rice and beef) and digital markets. It is understood that the US is also demanding several hundred billion dollars in investment commitments from South Korea in the current trade negotiations, and it is highly likely that an agreement to expand US purchases of South Korean key industrial products will be included.

The imposition of a 25% reciprocal tariff by the US on South Korea is attributed to a surging trade deficit. The US trade deficit with South Korea, which was $17.9 billion in 2018, more than tripled to $65.8 billion last year, mainly due to increased exports of South Korean automobiles and semiconductors. The US claims that South Korea imposes a 50% tariff on US products and has therefore applied 25% as a reciprocal tariff. Concerns are rising about a decrease in South Korean exports to the US in industries such as textiles, apparel, fine chemicals, and computers. This reciprocal tariff is based on the Trump administration's International Emergency Economic Powers Act (IEEPA) and is the highest level among FTA signatory countries with the US.

South Korea's investment in the US is already active. Last year, 43% of South Korea's overseas investment flowed into the US, the highest since 1988. South Korean companies are actively participating in US manufacturing resurgence policies, such as Samsung Electronics' investment in a Texas foundry plant, proving themselves as key partners in the global supply chain. In particular, due to the impact of the US CHIPS Act and Inflation Reduction Act (IRA), investment in manufacturing sectors such as semiconductors and secondary batteries in the US is expected to continue. This aligns with the trend of expanding economic exchange between South Korea and the US, as evidenced by South Korean exports to the US surpassing those to China to rank first in December last year.

Meanwhile, the 'South Korea-US 2+2 Trade Consultation,' originally scheduled to be held on the 25th (local time) in Washington D.C., has been postponed due to a scheduling conflict for US Treasury Secretary Scott Bessent. This consultation was significant as it was the first inter-governmental meeting where both countries' finance and trade ministers were to discuss concerns related to US tariff policies. However, the visit schedules of South Korean Minister of Trade, Industry and Energy Kim Jung-kwan and Minister for Trade Yeo Han-koo to the US will proceed as planned. They are scheduled to meet with US Commerce Secretary Howard Lutnick and USTR Representative Jamieson Greer, respectively, to discuss reciprocal tariffs and product-specific tariffs. At the 2+2 trade consultation held last April, South Korea strongly requested tariff exemptions and exceptions from the US, emphasizing the negative impact on the automotive sector. The government plans to focus on preparing a 'July Package' with the goal of tariff abolition before July 8th, when the reciprocal tariff grace period ends. Future trade negotiations between South Korea and the US are expected to be a major turning point in assessing the economic interests and trade policy directions of both countries.