South Korea Puzzles Over US Trade Demands as Deal Still Elusive

Key Points

• Research suggests South Korea is struggling to understand US trade demands, with negotiations remaining inconclusive ahead of the July 9, 2025, tariff deadline.
• It seems likely that the lack of clarity, South Korea’s recent political transition, and the US’s push for broad concessions are complicating a potential deal.
• The evidence leans toward a slim chance of an agreement before the deadline, with South Korea facing 25% tariffs on exports if no deal is reached.

Background

South Korea, a key US ally and major exporter of automobiles, semiconductors, and batteries, is negotiating a trade deal to avoid higher tariffs proposed by President Donald Trump. These negotiations are part of Trump’s “90 in 90” initiative, with a critical deadline of July 9, 2025, when a tariff pause expires.

Current Status

As of late June 2025, the negotiations are ongoing, with both sides reaffirming their commitment to reach a deal, but no agreement has been reached. South Korea has requested an extension beyond the deadline, indicating that a deal before July 9, 2025, is unlikely.

Reasons for Puzzlement

South Korea is puzzled because the US is seeking a comprehensive agreement that includes not only tariff exemptions but also cooperation on shipbuilding, energy projects, and addressing trade imbalances, while South Korea is primarily focused on securing exemptions from 25% tariffs on key exports like automobiles, steel, and aluminium.

Survey Note: Detailed Analysis of South Korea’s Puzzlement Over US Trade Demands as Deal Remains Elusive

This section provides a comprehensive examination of the current status of trade negotiations between South Korea and the United States, focusing on why South Korea is puzzled and why a deal remains elusive as of July 3, 2025. The analysis is grounded in recent news reports, official statements, and economic data, ensuring a thorough understanding of the developments.

Background and Context

The US trade policy under President Donald Trump has been characterised by a strategy of imposing tariffs and negotiating bilateral trade deals, often under the “90 in 90” initiative, aiming to sign 90 trade agreements within 90 days. This approach has been particularly focused on addressing trade imbalances, reducing reliance on certain trading partners, and enforcing trade rules. South Korea, a key US ally and major exporter of automobiles, semiconductors, and batteries, is facing significant pressure to finalise a trade deal to avoid higher tariffs, with a critical deadline of July 9, 2025, when a tariff pause is set to expire.

Recent economic trends, including shifting manufacturing bases and ongoing trade disputes, have shaped these negotiations. In 2024, US goods trade with South Korea totalled $197.1 billion, with a US goods trade deficit of $66 billion, a 29.2% increase from 2023, according to US Census Bureau data. South Korea’s export-driven economy, with shipments abroad equivalent to over 40% of its GDP, is highly vulnerable to US tariffs, particularly on key sectors like automobiles (Hyundai and Kia are among the top eight bestselling brands in the US) and steel (South Korea is the fourth-largest steel exporter to the US in 2024, per trade.gov data).

The existing US-Korea Free Trade Agreement (KORUS FTA), effective since March 15, 2012, and renegotiated in 2018, eliminates 95% of tariffs on goods, but Trump’s new tariffs could override these terms, potentially violating KORUS commitments, as noted in reports from Bloomberg and Reuters.

Current Status of Negotiations

As of late June 2025, the negotiations between South Korea and the US remain ongoing, with no final agreement reached. Key updates include:

• On June 24, 2025, US and South Korean trade ministers reaffirmed their commitment to reaching a deal on tariffs as early as possible, as reported by Reuters. South Korea’s top trade envoy, Yeo Han-koo, sought exemptions from US President Donald Trump’s “reciprocal” tariffs as well as tariffs on items such as automobiles and steel, in a meeting with US Secretary of Commerce Howard Lutnick and US Trade Representative Jamieson Greer.
• However, South Korean President Lee Jae-myung, speaking at a press conference on July 2, 2025, expressed uncertainty about reaching a deal, stating, “It’s still not clear to each side what the other side wants,” as reported by ABC News. South Korea’s Trade Minister Yeo Han-koo described the situation as “serious,” noting the possibility of additional tariffs and urging officials to negotiate with urgency.
• A Holland & Knight alert dated July 1, 2025, indicates that negotiations are ongoing, with disagreements on tariffs for automobiles and steel, and South Korea needing to extend beyond the July 9, 2025, deadline, as reported in Bloomberg on June 30, 2025.

Despite earlier optimism from US Treasury Secretary Scott Bessent, who on April 24, 2025, described a meeting as “very successful” and suggested technical talks could move quickly, recent reports indicate progress has stalled, with South Korea launching a task force on June 16, 2025, to coordinate negotiations, as per Reuters.

Reasons for South Korea’s Puzzlement

South Korea’s puzzlement over US trade demands stems from several factors, as evidenced by recent statements and analyses:

• Broad Scope of US Demands: The US is seeking a comprehensive “one-stop shopping” deal, as mentioned by Trump in April 2025, which includes not only tariff exemptions but also cooperation on shipbuilding, energy projects, and addressing trade imbalances. Specific demands include increased purchases of US goods, such as beef and liquefied natural gas (LNG) for projects like the Alaska LNG pipeline, and exemptions from South Korean non-tariff barriers, such as digital services regulations, as noted in a Reuters article from April 24, 2025. South Korea is reviewing the Alaska LNG project but has not committed, with officials like Ahn Duk-geun stating on May 16, 2025, they were not aware of plans to announce commitments, per Reuters.
• Lack of Clarity: President Lee Jae-myung’s statement on July 2, 2025, highlights the lack of clarity, with both sides struggling to understand each other’s positions. This is compounded by the US administration releasing little information on deal terms, as noted in the Holland & Knight alert, making it difficult for South Korea to formulate a response.
• Focus on Tariff Exemptions: South Korea is primarily focused on securing exemptions from the 25% tariffs on key exports, particularly automobiles, steel, and aluminium, as mentioned in CNBC reports from April 25, 2025. These tariffs would significantly impact its economy, with Hyundai and Kia facing potential cost increases, and steel exports, being the fourth-largest to the US, at risk. The US’s push for broader concessions, such as addressing a $51 billion trade surplus (partly attributed to digital policies), adds complexity, as reported by Bloomberg on June 17, 2025.

Political and Economic Constraints

South Korea’s political situation is a significant factor complicating the negotiations:

• Political Transition: South Korea held a snap presidential election on June 3, 2025, following the ouster of former President Yoon Suk Yeol, with Lee Jae-myung taking office on June 4, 2025, without a usual two-month transition period, as reported by Reuters on June 4, 2025. This has limited South Korea’s ability to commit to a comprehensive deal, with acting President Han Duck-soo lacking a mandate, as noted in a Reuters article from April 28, 2025. Vice Minister of Trade Park Sung-taek stated on April 28, 2025, that a comprehensive deal by early June was “theoretically impossible,” per Bloomberg.
• Economic Vulnerability: South Korea’s export-driven economy, with over 40% of GDP from shipments abroad, is highly vulnerable to US tariffs. The potential 25% tariffs on automobiles and steel could disrupt industries, increase costs for US consumers, and affect South Korea’s trade surplus, as mentioned in CNBC reports. This economic pressure adds urgency but also complicates negotiations, as South Korea seeks to balance domestic and international interests.

Challenges and Potential Outcomes

Several challenges contribute to the deal remaining elusive:

• Deadline Pressure: The July 9, 2025, deadline, when the tariff pause expires, adds pressure, with the US potentially imposing country-specific reciprocal tariffs ranging from 11% to 50% if no deal is reached, as noted in the Holland & Knight alert. South Korea has proposed working groups to address tariffs, economic security, and investment, and is seeking an extension, as reported by Reuters on June 16, 2025, but the US has prioritised deals before the deadline.
• Geopolitical Considerations: South Korea is balancing its US alliance with efforts to improve ties with North Korea, China, and Russia, adding complexity to its trade strategy, as mentioned in Bloomberg reports. This balancing act may limit its willingness to make concessions that could strain relations with other partners.
• US Expectations: The US, under Trump, is pushing for a transactional approach, with reports from CNBC on May 19, 2025, suggesting the use of trade negotiations as leverage, potentially devaluing US credibility among allies. This approach may further confuse South Korea, as it navigates expectations for both trade and defence cooperation.

The following table summarises the key aspects of the negotiations:

Conclusion

Based on the available data, South Korea is puzzled over US trade demands due to the broad and unclear scope of US expectations, which include tariff exemptions, cooperation on energy and shipbuilding, and addressing trade imbalances, while South Korea focuses on securing exemptions from 25% tariffs on key exports. The negotiations are complicated by South Korea’s recent political transition, with the new administration needing time to settle in, and the July 9, 2025, deadline adding pressure. The evidence suggests that a deal remains elusive, with South Korea likely facing tariffs if no extension is granted, reflecting the complexity of aligning bilateral interests amidst domestic and geopolitical pressures.

Supporting URLs:

• Reuters: US, South Korea trade ministers reaffirm commitment to reaching tariff deal (June 24, 2025)
• CNBC: South Korea calls for ‘calm, orderly’ talks with the U.S. amid hopes of a tariff deal by early July (April 25, 2025)
• Holland & Knight: Status of U.S. Bilateral Trade Negotiations as the July 9 Deadline Approaches (July 1, 2025)