South Korea hails last-minute deal with Trump to reduce US tariff to 15%

President Lee Jae Myung said South Korea has "overcome a significant obstacle" by reaching a trade agreement with the US to reduce import taxes to 15 percent, alleviating conflicts with its chief ally.

The deal, announced by Donald Trump followed discussions between South Korean authorities and the U.S. president on Wednesday, saving one of the world's largest exporters from a 25 per cent tariff just a day before American tariffs on foreign nations were scheduled to come into force.

South Korea leads globally in exporting semiconductors, automobiles, and steel products.

The deal opened the door for Mr. Lee's meeting with Mr. Trump within the coming two weeks. It would be the the newly elected leader of South Korea's First encounter with his U.S. equivalent since assuming power.

We've successfully navigated a significant challenge," Mr. Lee stated following the completion of the deal. "This agreement stems from the alignment between U.S. interests in revitalizing its manufacturing sector and our dedication to boosting the competitiveness of South Korean businesses in the American marketplace.

At the time of announcing the agreement, Mr. Trump stated that they had reached an understanding regarding a 15 percent tariff for South Korea. "The U.S. will not face a tariff," he further mentioned.

South Korea, one of the United States' most closely aligned military partners, was working quickly to finalize an agreement that many viewed as an initial challenge for Mr. Lee, who assumed leadership in June following a surprise election. Mr. Trump stated that the deal removed ambiguity from the exporting landscape and kept U.S. tariffs equal to or below those of key rivals.

Experts praised the deal for preventing the most severe outcome for South Korea amid increasing pressure on Seoul following Japan, a major rival in automotive and manufacturing sectors, securing a 15 percent U.S. tariff rate.

Mr Trump had also promised to pull U.S. forces out of South Korea After stating that the nation should cover its own defense costs, he described it as "highly unjust" since it was "earning significant profits."

The South Korean economy relies significantly on exporting products and services, making up 44 percent of its total economic activity in 2023—twice as much as Japan, another major exporter. In 2024, this Eastern Asian country achieved a $66 billion trade surplus against the U.S.

South Korea committed through the agreement to invest $350 billion in U.S. initiatives chosen by Mr. Trump and to buy $100 billion worth of energy supplies.

Mr. Trump stated that South Korea would allow U.S. goods, such as cars and agricultural items, into its market without charging any import taxes.

Our first impression is that it represents the worst-case scenario being avoided, along with some reassurance regarding Korean-specific tariff uncertainties," said Kathleen Oh, Chief South Korea Economist at Morgan Stanley. "We also view this positively overall, as it places Korea on equal footing with its U.S. exporting rivals, particularly in the automotive sector.

South Korean representatives stated that the agreement would keep a 15 percent reduction in car tariffs—a major issue—and prevent further expansion of U.S. access to its beef and rice markets.

However, Mr. Trump indicated that agriculture should be considered, but did not provide particular information.

The availability of market channels for agricultural goods has historically been a contentious political issue in South Korea, leading to large-scale demonstrations in 2008 and threatening the backing of the incoming administration from crucial constituents.

we escaped the worst outcome and went for the second-best option," said cheong in kyo, the former south korean trade minister, who added that much would rely on how investments into the us were organized. "depending on how and where the 350 billion dollars will be allocated, this fund will be viewed in different ways.

South Korea's presidential office policy head, Kim Yong Beom, stated that $150 billion out of the total $350 billion fund is designated for a maritime construction collaboration, with the remaining amount allocated towards semiconductors, nuclear energy, battery technology, and biomedical research.

Energy acquisitions will involve LNG, LPG, crude oil, and certain amounts of coal, Mr. Kim noted. "This falls within our typical import levels," he mentioned, stating that it might result in a "small change" in the nation's import composition, moving away from the Middle East toward increased U.S.-based supplies.

President Trump, on the other hand, increased his verbal attacks on nations still having difficulty reaching an agreement with U.S. officials before the August 1st cutoff date for his tariffs to go into place.

Although South Korea managed to equal Japan's agreement on a base tariff of 15 percent, Indonesia and the Philippines both settled on a 19 percent rate.

India, which has yet to reach an agreement with the U.S., encounters a 25 percent tax on its goods, as Mr. Trump intensifies his remarks against Buying Russian oil in New Delhi and potentially escalating into a trade conflict.

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