Morteza Soltanpour – South Korea Affairs Expert
Trump’s decision to impose a 25% tariff on all imported goods from South Korea, including automobiles, steel, semiconductors, and electronics, has created a profound challenge for the country’s economy. The implementation of these tariffs, set to begin on August 1, 2025, has been framed as a measure to reduce the U.S. trade deficit, while South Korea’s trade surplus with the U.S. reached approximately $66 billion in 2024.

The immediate effects of this decision were felt in South Korea’s economy. The stock market plummeted, the won depreciated against the dollar, and export-driven companies such as Samsung, Hyundai, Kia, and SK Hynix suffered losses in global markets. At the same time, concerns over economic growth intensified, with the Bank of Korea suggesting that annual growth could drop from 2.1% to around 1.5%. South Korea’s financial structure, which is built on global supply chains and exports to major markets, appears more vulnerable than ever under these pressures.

Meanwhile, domestic political developments in South Korea, coinciding with this economic crisis, have shifted the country’s response trajectory. The rise of Lee Jae-myung, the new president and leader of the progressive faction in spring 2025, introduced a more independent approach toward Washington in South Korea’s foreign and economic policies. Lee, who had repeatedly criticized the country’s excessive reliance on the U.S., now faces a challenge that could serve as a major test for his administration’s independent policies.

The Lee administration responded swiftly and multilaterally to the tariff crisis. While initiating intensive negotiations with the U.S., it also formally filed a complaint against the United States at the World Trade Organization (WTO). Additionally, Seoul sought to establish a multilateral diplomatic front with other countries targeted by Trump’s tariffs, such as Vietnam, China, and European nations. The government also launched a broad plan to diversify export markets, focusing primarily on strengthening economic ties with the European Union, Southeast Asia, India, and Latin America.

However, numerous obstacles stand in the way of these policies. One major challenge is the difficulty of finding a genuine alternative to the U.S. market. The European Union is grappling with economic and inflationary crises, China’s economy is experiencing sluggish growth, and markets in other parts of Asia and Africa are not yet expansive or stable enough to quickly fill the void left by the U.S. market. Moreover, a concerning factor that should not be overlooked is the possibility—however slim—of a political power shift in China. In recent months, increasing rumors have circulated about Xi Jinping’s declining influence and potential changes in Beijing’s political leadership. Any instability or transition of power in China, South Korea’s second-largest trading partner, could significantly limit Seoul’s ability to rely on the Chinese market as a substitute for the U.S. market. This potential geopolitical shift negatively impacts South Korea’s options and introduces new obstacles to export diversification.

Beyond tariffs, other strategic disagreements between South Korea and the U.S. could further strain bilateral relations. One such issue is the sharing of defense costs on the Korean Peninsula—a topic that had already caused tensions during Trump’s first presidency. Thus, it is highly likely that the demand for South Korea to bear a larger share of the costs for U.S. military presence in the region will resurface, potentially sparking new disputes.

Additionally, the level of domestic support for both the Trump administration in the U.S. and the Lee administration in South Korea is a critical factor. The extent to which each leader can maintain public and political backing in their respective countries will determine how firmly and consistently they can implement their policies. In the U.S., deep political divisions persist, while in South Korea, President Lee faces a strong and conservative opposition.

Nevertheless, taking a broader perspective, it can be argued that the Lee Jae-myung administration’s economic and trade policy direction in response to the new wave of American protectionism has been well-structured and coherent. From pursuing legal action in international institutions to formulating domestic support programs and strengthening diplomatic engagement with other nations, this series of measures reflects the government’s deep understanding of the crisis’s complex dimensions.

The year 2025 may be seen as a turning point in the economic and strategic relations between South Korea and the United States. While Trump has once again steered U.S. economic policy toward isolationism, Seoul is now under a new administration unwilling to accept the role of a mere subordinate ally. This confrontation is more than just a trade dispute—it reflects a shift in the international order and the reassertion of political and economic independence in Asia. The path ahead will not be easy, but South Korea is determined to play a more active and independent role than before, even if it comes at the cost of tensions with significant powers and regional risks.