Trade negotiations between South Korea and the US have stalled, after the two countries agreed in principle at the end of July to reduce the US import duty rate to 15%. The import tariff remains stuck at 25%, which is the rate announced by the US government at the end of March.
This puts exports from South Korea to the US, including vehicles and components, at a significant disadvantage compared with Japan, which has successfully negotiated an import tariff reduction from 25% to 15% after the country’s manufacturers committed to investing US$ 450 billion into the US economy. Japan’s 15% import duty rate was signed into law earlier this month, after US President Donald Trump signed an executive order.
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For South Korea, the US import duty rate remains at 25%, with the government struggling to find commitments from local companies to invest the US$ 350 billion in the US economy, as promised during the earlier negotiations. South Korea’s Presidential Chief of Staff for Policy, Kim Yong-beom, recently told reporters: “We cannot rush tariff negotiations just to narrow the gap in auto industry tariffs, because US$ 350 billion would deal would be too great a shock to our entire economy.”
According to recent reports, the South Korean government has managed to secure US investment pledges from South Korean companies worth up to US$ 150 billion, far short of the US$ 350 billion it had agreed with the US. Hyundai Motor Group confirmed it plans to invest US$ 26 billion in the US, while other automotive companies including electric vehicle (EV) battery manufacturers are also investing heavily in the country.
With around 1.6 million vehicles exported from South Korea to the US last year, signing an improved trade deal with the US is crucial for the country’s automotive industry. The 25% import tariff puts the industry at a significant disadvantage compared with Japan, which exported around 1.5 million vehicles to the US from Japan last year.
Japanese and South Korean vehicle manufacturers have significant local vehicle and manufacturing operations in the US and also supply the US from their extensive vehicle production operations in Mexico and Canada.
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