US-Korea Trade Talks: Steel, Auto Tariffs Loom Large

Seoul Pushes for Tariff Cuts Amid Race to Avoid August Deadline

South Korea is pressing Washington for reduced tariffs on its autos and steel as high-level trade discussions intensify. With a critical August 1 deadline approaching, Seoul aims to secure a compromise pact to avert significant levies from the United States.

Progress and Sticking Points

South Korean officials report “considerable progress” in talks regarding cooperation across key industrial sectors. However, a significant hurdle remains: the US need to lower industry-specific tariffs on cars and steel. This issue was a focal point in recent meetings held in Washington by top South Korean trade representatives.

South Korea wants to make a deal right now.

— Donald J. Trump (@realDonaldTrump) [Insert Date Here]

US President Donald Trump indicated optimism, telling reporters, South Korea wants to make a deal right now. He did not provide further details on what might finalize an agreement or suggest a timeframe.

Political Landscape and Trade Deficits

The urgency for Seoul stems from a potential 25% tariff on its exports, set to take effect after a delayed start to negotiations. These discussions were initially hampered by political turmoil following the recent presidential election. President Lee Jae-myung assumed office on June 4, succeeding his predecessor who was ousted after a failed martial law attempt.

A senior South Korean trade official noted Washington’s openness to considering exemptions on certain tariffs. This willingness, similar to a previous agreement with Great Britain, is contingent on South Korea presenting a clear proposal to decrease bilateral trade deficits. Data from Korea Customs Service reveals South Korea’s trade surplus with the US reached a record $55.6 billion in 2024, a 25% increase from the previous year, largely driven by automotive exports.

Economic Context

Economists point out that South Korea already benefits from near-zero effective tariff rates under a Free Trade Agreement first established in 2007 and later revised in 2018 during President Trump‘s initial term. South Korea’s trade surplus with the US in 2024 marked a significant uptick, with automotive exports playing a crucial role.

The Korean government is actively seeking to negotiate these import duty reductions or exemptions, aiming to secure favorable terms. The ongoing dialogue underscores the complex interplay between industrial policy, geopolitical relationships, and global trade dynamics.

According to the U.S. Bureau of Economic Analysis, U.S. direct investment in South Korea was $58.9 billion in 2022, while South Korean direct investment in the U.S. was $40.3 billion, indicating substantial economic ties (U.S. Bureau of Economic Analysis, 2023).