As of August 2025, the U.S. and South Korea are operating under a newly negotiated trade deal that was finalized in late July 2025. This agreement sets specific tariff rates and investment commitments, effectively superseding or altering the terms of the previous Korea-U.S. Free Trade Agreement (KORUS FTA).
The new deal was reached to prevent the Trump administration from imposing a 25% tariff on South Korean imports. The final agreement, however, does impose tariffs that are higher than under the previous KORUS arrangement.
Key
provisions of the 2025 trade deal
· Tariffs: South
Korean goods imported into the U.S. now face a 15% tariff rate. This rate is
applied across the board, affecting a wide range of products including
automobiles, which will also be subject to the 15% rate instead of the higher
25% rate threatened by the U.S..
· Korean investment: South
Korea has pledged to invest $350 billion in the U.S. in projects and assets
selected by the president. A portion of this investment, up to $150 billion, is
specifically designated for the U.S. shipbuilding industry.
· Energy purchases: The
agreement includes South Korea's commitment to purchase $100 billion of U.S.
energy products, such as liquefied natural gas (LNG).
· Negotiations on other issues: The deal did not resolve all trade-related issues. Negotiations are expected to continue on non-tariff barriers, such as auto safety regulations, as well as digital services and currency policy.
Ongoing
discussions
Despite
reaching a deal, some details remain under discussion and could cause future
friction between the two countries.
· Investment fund
structure: The two sides have yet to agree on the detailed
structure of the $350 billion investment fund, including the timelines and
mechanisms for its disbursement.
· Satisfaction with terms: Some U.S. officials have reportedly signaled dissatisfaction with certain terms, and South Korea has requested an exemption from the new reciprocal tariffs, though none has been confirmed.
Status
of the KORUS FTA
The new arrangement bypasses and overshadows the KORUS FTA, which took effect in 2012. The White House's ability to impose tariffs outside the scope of a formal free trade agreement has raised concerns among some trade experts about the future of other U.S. trade pacts.
As of August 2025, the existing trade agreement between the U.S. and South Korea is the U.S.–Korea Free Trade Agreement (KORUS FTA), which was substantially altered by a new deal announced in late July.
Following threats by the U.S. to impose a 25% tariff on all South Korean imports, the two sides negotiated a preliminary deal that introduced significant new terms.
New
terms of the July 2025 trade deal
· Reduced tariffs: South
Korean goods imported into the U.S. now face a 15% tariff, down from the 25%
threatened by the U.S. This rate is similar to the one the U.S. also negotiated
with Japan and the European Union.
· Automotive tariffs:
Korean-made automobiles and parts are subject to the same 15% tariff, a key
concession that prevents them from facing the steeper 25% auto tariff the U.S.
imposes on most other countries.
· South Korean investment
in the U.S.: As part of the agreement, South Korea has pledged a substantial
$350 billion investment in the United States.
o $150 billion is
earmarked for the U.S. shipbuilding industry, an area where South Korean
expertise is seen as beneficial to U.S. national security.
o $200 billion is slated
for other strategic sectors, including semiconductors, batteries, and critical
minerals.
o Details on how these
funds will be directed and structured are still being negotiated.
· U.S. energy purchases:
South Korea has agreed to purchase $100 billion worth of U.S. liquefied natural
gas (LNG) or other energy products.
· Agriculture and market access: The U.S. stated that South Korea would become "completely open to trade," including accepting more American cars, trucks, and agricultural products. South Korean officials deny agreeing to any further opening of their sensitive agricultural markets, such as rice and beef.
Status
and future developments
· KORUS FTA context: The
new tariff and investment framework significantly alters the trading
relationship previously governed by the KORUS FTA, which had largely eliminated
tariffs on manufactured goods and agricultural products. While KORUS remains
technically in effect, the new tariffs apply on top of or in place of many of
its previous provisions.
· Ongoing negotiations:
As of late August 2025, many of the deal's specifics remain to be worked out.
U.S. and South Korean officials continue to negotiate on topics including the
structure of the investment funds, safety regulations for U.S. auto imports,
and other bilateral issues.
· Potential for renegotiation: President Trump has indicated he is open to further negotiations but gave no assurance of additional concessions. The outcome of ongoing talks will determine the final details of the trade relationship.
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Comments
S Korean cars continue to be popular with US Consumers and the lower 15% corporate tax for US-Shored Korean car plants is a “plus” for S Korea.
S Korea faces a stronger N Korea as Trump seeks to reduce S Korean Military Funding.
Norb Leahy, Dunwoody GA Tea Party Leader
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