Trump Raises US Tariffs on South Korea Imports to 25%
US President Donald Trump has officially announced an increase in tariffs on South Korean imports to 25%, escalating tensions in trade relations. This decision follows accusations that South Korea is not living up to a trade agreement established last year.
Key Details of the Tariff Increase
– New Tariff Rate: The tariffs will rise from 15% to 25%.
– Affected Products: The increase applies to a broad range of goods, including automobiles, lumber, pharmaceuticals, and other reciprocal tariffs.
– Reasoning: Trump criticized South Korean lawmakers for delaying approval of the trade deal, asserting that the US had acted promptly in reducing its tariffs as per the agreement.
South Korea’s Response
– Official Notice: South Korea stated that it had not received formal notification about the tariff increase and is seeking urgent discussions with Washington.
– Diplomatic Actions: South Korea’s Industry Minister, Kim Jung-kwan, currently in Canada, plans to visit Washington swiftly to meet with US Commerce Secretary Howard Lutnick.
Economic Context
– Trade Volume: In 2022, South Korea exported goods worth approximately $123 billion (£90 billion) to the US, making it the second-largest export market for America, following China. Notably, car exports constituted about $30 billion of that total.
– Market Reaction: Initially, shares of South Korean automakers Hyundai and Kia dropped by up to 6% after the announcement. However, they eventually closed with only a 1% decline. South Korea’s benchmark Kospi stock index also reversed early losses, ending the day up 2.7%.
Investor Sentiment
Analysts expressed skepticism regarding Trump’s tariff increase, noting his recent changes of course on tariffs involving European trade partners. Derren Nathan, head of equity research at Hargreaves Lansdown, stated, With a delegation on its way from Seoul to Washington, markets are viewing this latest twist as more carrot than stick.
Background of the Trade Agreement
– Previous Deal: Last October, the US and South Korea reached a trade agreement with South Korea pledging to invest $350 billion (£256 billion) in the US, including funds for shipbuilding.
– Tariff Reduction Timeline: In November, a requirement was established that the US would lower tariffs on certain products once South Korea started the approval process for the deal. The agreement was submitted to South Korea’s National Assembly for review on November 26 and is anticipated to pass by February, according to local media.
Tariff Implications
– Cost to Importers: US companies importing goods from South Korea will now face a 25% tax on these products.
– Trump’s Tariff Strategy: Throughout his presidency, Trump has frequently used tariffs as a tool for foreign policy. Recently, he threatened Canada with a 100% tariff if it engaged in trade deals with China. Chinese officials announced that a strategic partnership with Canada would not undermine other countries.
Conclusion
The increase in tariffs on South Korean imports to 25% marks a significant shift in US trade policy and creates potential challenges for both countries. As diplomatic discussions unfold, the long-term effects on the economic relationship between the US and South Korea remain to be seen. Understanding the updates and ramifications of these tariffs will be crucial for businesses and investors navigating this evolving trade landscape.