What's happened
On January 26, 2026, President Trump announced via social media a tariff increase from 15% to 25% on South Korean goods, citing Seoul's failure to enact legislation tied to a $350 billion investment trade deal. South Korea insists the deal requires no parliamentary ratification and is working to pass related bills. Talks between officials continue to avoid escalation.
What's behind the headline?
Tariff Hike Signals Rising US Frustration
President Trump's tariff increase is a clear signal of impatience with South Korea's legislative delays in implementing the trade deal. Despite the deal being framed as a memorandum of understanding, the US treats it as binding, expecting swift action.
Underlying Tensions Beyond Tariffs
The dispute extends beyond tariffs to regulatory friction, especially concerning US tech companies like Coupang facing investigations in South Korea. This adds a layer of political pressure, with the US leveraging tariffs to influence broader trade and regulatory policies.
Political Dynamics in South Korea
South Korea's parliament is divided, with the ruling party pushing to consolidate bills for investment facilitation, but opposition control of key committees slows progress. Currency volatility and financial market concerns also complicate investment flows.
Economic and Strategic Implications
The auto sector, a major export to the US, faces potential setbacks if tariffs revert to 25%, risking competitiveness against Japan and the EU. The tariff threat also reflects Trump's broader use of trade policy as a geopolitical tool, evident in recent threats against Canada and Europe.
Forecast
Negotiations will intensify with upcoming visits by South Korean trade officials to Washington. The US is likely to maintain pressure until legislative action is evident. Markets may remain volatile, especially in Korean auto stocks and currency markets. The dispute underscores the fragility of US-South Korea economic ties amid shifting global trade dynamics.
What the papers say
The New York Times' Choe Sang-Hun highlights the diplomatic warmth last year, noting South Korea's leader gifted Trump a golden crown replica and the US allowed nuclear submarine development, yet now relations face renewed uncertainty due to legislative delays. Reuters' Cynthia Kim details the complex governance and financial concerns delaying the $350 billion investment, emphasizing currency volatility and parliamentary gridlock. The Guardian reports on the immediate market impact, with Korean carmaker shares dipping after Trump's announcement, and quotes Atlantic Council's Josh Lipsky on the shattered expectations of tariff stability in 2026. The Independent's Shweta Sharma connects the tariff threat to regulatory disputes over US tech firms, particularly Coupang, and notes South Korea's commitment to resolving the issue through talks. France 24 and Al Jazeera provide concise summaries of Trump's social media announcement and South Korea's surprise and response. Together, these sources reveal a multifaceted dispute involving trade commitments, legislative hurdles, regulatory tensions, and geopolitical maneuvering.
How we got here
In 2025, the US and South Korea agreed on a trade deal where Seoul pledged $350 billion in US investments in exchange for reduced tariffs on Korean exports. The deal followed tense negotiations and included commitments to ease market access and non-tariff barriers. Implementation has stalled amid legislative delays and regulatory disputes, notably over US tech firms in Korea.
Go deeper
- What are the key points of the US-South Korea trade deal?
- Why has South Korea delayed passing the investment legislation?
- How might the tariff increase affect South Korean exports and the US market?
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