SEOUL, Jan 27 — South Korea scrambled today to assure the US it remained committed to implementing a trade deal after US President Donald Trump said he would hike tariffs on autos and other imports from its ally, blaming a delay in enacting the pact agreed last year.

Trump said yesterday that South Korea’s parliament was not living up to its side of the deal by swiftly enacting the agreement he reached with President Lee Jae Myung to make huge investments in US business projects in return for tariff cuts. For South Korea, the decision, which officials in Seoul said caught them by surprise, is the latest setback as it tries to navigate the alliance and trade partnership amid potential challenges to its security and financial stability posed by Trump’s demands.

Trump and Lee struck a deal in principle last July for Seoul to make US$350 billion (RM1.3 trillion) of investments in the US, despite concerns over the impact of such a large outflow from Asia’s fourth-largest economy.

“President Lee and I reached a Great Deal for both Countries on July 30, 2025 and we reaffirmed these terms while I was in Korea on October 29, 2025,” Trump wrote on social media. Trump said South Korea’s legislature had not enacted the deal and as a result: “I am hereby increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15 per cent to 25 per cent.”

Currency concerns

Under the deal struck last year, South Korea committed to pay US$200 billion of the US$350 billion in cash in phased instalments capped at US$20 billion a year in an effort to maintain won stability.

Earlier this month, South Korea’s Finance Minister Koo Yun-cheol told Reuters the government planned to implement the investment package as soon as possible, while noting that uncertainty over a US Supreme Court ruling on Trump’s tariffs expected soon could affect the process.

But highlighting how the timeline may be stretched, he said the planned investment of US$350 billion was unlikely to kick off in the first half of 2026, given the weakness in the won.

The prospect of large currency outflows has caused headaches for authorities in Seoul at a time when the won has slumped to levels unseen since the global financial crisis from 2007 to 2009.

Trump announcement puzzles South Korea

It was not immediately clear when the hike would take effect. A source familiar with internal discussions between the countries said Trump may have been prompted by recent Korean regulatory actions against Coupang, a US-listed company that has said the moves are unfair and discriminatory.

The countries have been in talks to address Washington’s concerns about regulations on US tech firms as part of the trade deal.

South Korea’s presidential Blue House said it was committed to implementing the deal and would continue to take the required steps to finalise it. Lee’s chief policy aide convened an emergency meeting with officials, and the industry minister, currently in Canada, would visit the US soon and meet Secretary of Commerce Howard Lutnick, the Blue House said.

A top trade envoy will also visit Washington soon to meet US Trade Representative Jamieson Greer, it added.

The White House and Greer’s office did not respond to requests for comment. South Korea’s ruling Democratic Party said five bills that would enact the US investment are pending committee review and with backing from the opposition, parliament should be able to speed up their passage, potentially in February.

Trump’s social media post left South Korean officials battling to explain how they appeared to be wrongfooted.

“Minister for Trade Yeo just met USTR Greer in Davos but he didn’t hear a word of complaint,” Chairman Lee Chul-gyu of parliament’s trade committee told reporters after meeting the trade envoy. South Korea’s benchmark KOSPI index fell 1.19 per cent before rebounding to close up 2.73 per cent, while the won weakened 0.5 per cent against the dollar. Trump has upended global trade by imposing tariffs on imports from nearly every country since beginning his second term in office in 2025. In some cases, he has threatened tariff hikes and delayed them or not followed through. Choi Seok-young, a former South Korean trade negotiator, said Trump’s tariff hike threat could be “a political move in which the United States is exerting maximum pressure ... to force concessions during the ongoing negotiations over non-tariff barriers.”

Exports to US fall in 2025

South Korea’s exports hit a record US$709.4 billion in 2025, up 3.8 per cent from 2024. US-bound shipments stood at US$122.9 billion, down 3.8 per cent but still making it the second-biggest market after China. Autos took up the largest share with 25 per cent of US shipments at US$30.2 billion, although down 13.2 per cent from 2024.

After last year’s agreement, tariffs on US imports of Korean autos and auto parts were cut to 15 per cent from 25 per cent, matching their Japanese competitors. The rate took effect on November 1.

Higher tariffs would hit South Korean automaker Hyundai Motor and its affiliate Kia particularly hard. Shares in Hyundai and Kia closed 0.81 per cent and 1.1 per cent lower respectively, after steeper falls in earlier trade.

Hyundai did not respond to a request for ⁠comment.

General Motors, which produces about 500,000 vehicles annually in South Korea and exports most of them to the US, also did not comment. — Reuters