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Emma Rose Boby
31 December 2025 |
What happened?
On 29 October 2025, during his visit to South Korea, President Trump and President Lee Jae-myung finalised the USD 350 billion trade deal. The much-awaited deal would assist the US in its bid for energy dominance, as South Korea has agreed to purchase US gas and oil in large quantities. South Korea would also invest over USD 350 billion, comprising a USD 200 billion cash investment (capped at USD 20 billion per year) and USD 150 billion for shipbuilding cooperation, along with HD Hyundai's USD 5 billion investment project to improve shipyards and supply chains.
President Trump also agreed that South Korea needed nuclear-powered submarines and discussed promoting maritime cooperation. The two also agreed to the US-ROK Technology Prosperity Deal, which would facilitate technology cooperation on the US's AI exports, AI adoption, 6G, quantum innovation, and more. Additionally, South Korean businesses and companies are expected to invest over USD 600 billion.
What is the background?
First, a brief note on US-South Korea trade and the deal. The bilateral trade between the US and South Korea has evolved into a robust partnership between the two countries, with the US being a primary market for South Korean products. Exports from South Korea to the US, now the nation's second-largest trading partner, include machinery and vehicles, electronics, mineral fuels and oils, and iron and steel. The US, in turn, exports technical and medical apparatus, meat, organic chemicals, and pharmaceutical products. In 2023, the US' goods exports to South Korea were estimated to be USD 61.3 billion, with crude oil (19.74 per cent), machinery (7.52 per cent), and petroleum gas (6.85 per cent) taking up the largest shares. South Korea's primary exports to the US in 2023 were cars (26.52 per cent), motor vehicles: parts and accessories (5.23 per cent) and refined petroleum (3.92 per cent). Their overall goods exports came to around USD 118 billion. There was a significant increase in South Korean exports to the US in 2024, reaching approximately USD 128 billion, with primary products including vehicles (33.57 per cent), machinery (20.84 per cent), and electronic equipment (16.33 per cent). However, for the US, goods exports totalled only USD 65.5 billion, with mineral fuels (28.18 per cent), machinery (11.18 per cent), and electronic equipment (8.98 per cent) being the major components.
Second, the importance of the automobile industry, Trump's tariffs, and bilateral relations. For South Korea, its automobile industry (the fifth largest automobile manufacturing country with Hyundai and KIA) is essential for its export growth. In 2024, South Korea's vehicle exports to the US also account for around USD 42.97 billion. The US imposition of 25 per cent tariffs left South Korea in a frenzy and posed a threat to the Korean economy. Seoul had to implement emergency measures, expanding policy financing and employing emergency liquidation. The tariff led to a 61.2 per cent decline in Korean-made automobile exports to the US. Annual loss was estimated to be around USD 54.87 billion. In 2024, Hyundai Motor Group sold over 1,633,290 vehicles in the US. Meanwhile, 90 per cent of GM Korea's production is sold to the US, which not only puts the automobile industry at risk but also affects employment. Though the tariffs were reduced to 15 per cent right before their imposition on South Korea, there was no formal agreement. Trump's tariffs are concerning both cars and semiconductors, which are the two primary exports to South Korea.
What does it mean?
The trade deal that was struck raises questions not only about the Free Trade Agreement between the two nations but also about the current stability of their ties. President Trump was met with multiple protests during his arrival in the country due to 'coercive politics' regarding the trade deals. President Lee may be caught in the tides of appeasement in terms of the US, but also in the midst of the rife political crisis in South Korea following his predecessor's impeachment. So, while the trade deal has been signed, it seems subject to change given the conflicting nature of South Korea's citizens' and President Trump's interests.
About the author
Emma Rose Boby is an Independent researcher from Bengaluru.
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