The South Korean government has reached an agreement with the United States regarding tariff negotiations. Mutual and automobile tariffs will be reduced to 15%, which is the same rate as those of Japan and the European Union (EU).
According to the Korea Trade and Investment Promotion Agency (KOTRA), automobiles are South Korea’s leading export to the United States. Exports to the United States account for over 50% of South Korea’s total automobile exports. The South Korean government prioritized reducing automobile tariffs and engaged in negotiations with the United States.
In a report compiled in May, the Bank of Korea, South Korea’s central bank, also pointed out that sluggish automobile exports were the biggest risk. South Korea has a free trade agreement with the United States. Before the 25% tariff on automobiles was imposed in April under the Trump administration, South Korea could export automobiles to the United States without paying tariffs. Initially, South Korea insisted on a 12.5% tariff because it had no basic tariff rate, but the US would not budge from 15%. Although the worst has been avoided, price competitiveness in the US market may still be damaged.
Source: The NikkeiPSR Analysis: For South Korea, which relies heavily on exports, reaching an agreement with the U.S. on tariffs was crucial for maintaining its industries. The negotiations ended with tariff rates equivalent to those of Japan and the EU, which is positive for maintaining price competitiveness in North America. However, the situation regarding semiconductors, an important export alongside automobiles, has not yet been finalized. It will be necessary to closely monitor this situation. PSR
Akihiro Komuro is Research Analyst, Far East and Southeast Asia, for Power Systems Research
