U.S. President Donald Trump has threatened to raise tariffs on South Korean autos and other goods to 25%, accusing Seoul of failing to implement a trade deal agreed during his visit to South Korea in October 2025. Under that agreement, U.S. tariffs were capped at 15% in exchange for large-scale South Korean investments in the United States. Trump’s comments, posted on social media, have reignited trade tensions between the two allies.
The 2025 US-South Korea Trade Deal
The trade agreement reached last year committed South Korea to invest $350 billion in strategic U.S. industries, while Washington agreed to limit tariffs on South Korean exports. The deal was framed as a win-win arrangement strengthening economic cooperation and alliance ties. However, the agreement was politically sensitive in Seoul and legally non-binding, requiring follow-up domestic measures to make the investment commitments operational.
Why Implementation Has Been Delayed
South Korean officials say the delay stems from administrative and financial constraints rather than political unwillingness. Finance Minister Koo Yun-cheol has stated that it is unlikely the investment programme can begin in the first half of the year due to complex governance procedures and market conditions. Investment decisions must pass through multiple layers of oversight, including assessments of commercial viability and legal compliance, slowing implementation.
Foreign Exchange Pressures and the Weak Won
A major obstacle to implementing the deal has been South Korea’s currency situation. The won has fallen nearly 7% against the U.S. dollar over the past six months, approaching levels last seen during the global financial crisis. Authorities fear that a $350 billion capital outflow to the United States could further weaken the currency and destabilise financial markets. Senior officials, including the central bank governor, have indicated they would block large investment outflows if exchange rate volatility worsens
Parliamentary Gridlock in Seoul
To facilitate the investment, the South Korean government plans to establish a special fund to raise foreign currency without disrupting domestic markets. Creating this fund requires new legislation, which has become stuck in parliament. Although President Lee Jae Myung’s Democratic Party holds a majority, the bill must pass through a finance committee chaired by the opposition, where disagreements over the scale and speed of the investment have stalled progress for months.
Comparison with Japan
Japan and South Korea agreed to similar trade frameworks with the United States last year, but Tokyo moved much faster. Japan’s parliament approved its deal in December and quickly launched consultations on U.S. investment projects. The contrast has reportedly frustrated Trump, reinforcing his perception that Seoul is dragging its feet while benefiting from reduced tariffs.
Other Sources of US-South Korea Trade Friction
Beyond the investment delay, tensions have also emerged over the treatment of U.S. technology firms operating in South Korea. A data breach at Coupang, a U.S.-listed e-commerce company, escalated into a broader dispute after the company alleged discriminatory regulatory scrutiny by South Korean authorities. U.S. officials view the issue as emblematic of unfair treatment of American firms, adding another layer of strain to bilateral trade relations.
Analysis
Trump’s tariff threat reflects his transactional approach to alliances, where economic commitments are treated as enforceable obligations rather than long-term strategic understandings. From Washington’s perspective, South Korea has enjoyed reduced tariffs without delivering the promised investment, justifying renewed pressure through trade measures.
From Seoul’s standpoint, however, domestic economic stability and legal process constrain rapid compliance. Currency weakness, parliamentary oversight, and financial risk management limit how quickly South Korea can act, regardless of political intent. The episode highlights a growing tension in US alliance management under Trump, where economic coercion is used even against close security partners, increasing uncertainty and friction within traditionally stable alliances.
With information from Reuters.
link
