South Korea has requested exemptions from US tariffs affecting key sectors, including steel and automobiles, according to Trade Minister Yeo Han-koo.

This request was made during Yeo’s meeting on June 23, 2025 with US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer in Washington.

Both parties expressed a commitment to reaching a beneficial agreement but did not provide a timeline.

The discussions also included cooperation in manufacturing and advanced technologies.

South Korea has faced challenges due to US tariffs, which include a 25% levy imposed during the Trump administration and currently on hold until July 9 as negotiations proceed.

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🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ US-South Korea trade tensions represent a stark reversal from KORUS expectations

The current tariff negotiations highlight a significant shift from the optimistic projections when the US-Korea Free Trade Agreement (KORUS) was implemented in 2012.

When established, KORUS was expected to increase US goods exports by $10-11 billion and support at least 70,000 American jobs through tariff elimination 1.

Instead, the US trade deficit in goods with South Korea rose by 75% after implementation, growing from $13.2 billion to $23.1 billion by 2017 2.

This outcome led to the 2018 renegotiation where South Korea agreed to reduce steel exports to the US by approximately 30% to avoid the 25% steel tariff that’s now being discussed again 3.

The situation demonstrates how free trade agreements often produce results that diverge from initial projections, leading to repeated cycles of negotiation as administrations change.

2️⃣ South Korea’s semiconductor industry faces dual pressures from tariffs and export controls

Beyond tariffs, US export controls are creating significant challenges for South Korea’s critical semiconductor sector.

South Korean chip exports to China fell by 31.8% in February 2025, following US restrictions aimed at preventing technology transfers to China 4.

Major companies like Samsung Electronics and SK Hynix, which operate plants in China, are particularly vulnerable to these controls, even as the South Korean government publicly downplays their impact 5.

This situation places South Korea in a difficult position as a US ally that simultaneously needs to maintain economic relations with China, which remains a crucial market for its semiconductor exports.

The export control issues reflect a broader trend where geopolitical security concerns increasingly override traditional trade relationships, forcing countries like South Korea to navigate complex technological decoupling pressures.

3️⃣ South Korea’s economic transformation now threatened by protectionist headwinds

The current trade tensions represent a significant challenge for a country that transformed itself through export-oriented policies.

After the Korean War destroyed 42-44% of production facilities, South Korea relied heavily on US aid, with exports averaging just $20 million annually in the 1950s while imports reached $370 million 6.

The country’s shift from protectionist policies to export promotion in the mid-1960s fueled its remarkable economic growth, with two-way trade between South Korea and the US increasing by 84% between 2002 and 2012 7.

Now, with Trump’s new tariff regime imposing baseline 10% tariffs on all imports and higher rates for specific countries, South Korea’s export-reliant economy faces significant headwinds, leading to the central bank slashing its 2025 GDP growth forecast from 1.5% to 0.8%.

This represents a significant inflection point for a country whose economic miracle was built on access to global markets, particularly the United States.

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