U.S. tariff pressures fail to deter South Korea's July export growth to a new high.
In a significant development, South Korea's exports surged to a record high for July 2025, with the country's exports exceeding $60 billion. This impressive growth was driven by a robust demand for semiconductors and automobiles, despite the ongoing tariff uncertainties between South Korea and the United States.
The tariff situation took a turn for the better when U.S. President Donald Trump announced a new trade agreement with South Korea, replacing the initially threatened 25% tariff on South Korean goods with a more manageable 15% reciprocal tariff. This arrangement aims to avoid a tariff war and maintain strong economic and security ties, with South Korea also committing to significant U.S. investments and purchases.
The agreement, finalized between the two nations, has been characterized as preventing a damaging tariff escalation between close allies, preserving South Korea’s important export markets, and fostering increased U.S. investments and energy exports to South Korea. However, many details remain vague, and further implementation specifics are awaited with the upcoming bilateral meetings.
The impact on South Korea’s exports is mixed. While the 15% tariff places some cost on South Korean goods entering the U.S., potentially reducing competitiveness compared to tariff-free conditions, it is significantly less restrictive than the initially threatened 25%. The deal also contains commitments by South Korea to invest heavily in the U.S. economy and increase purchases of U.S. energy products, which may help counterbalance the tariff impact by strengthening bilateral trade relations and encouraging U.S. exports to South Korea.
Notably, the tariffs on certain South Korean exports, such as semiconductors and wireless communication devices, have increased U.S. shipments for South Korea, offsetting the declines in steel and auto parts exports due to tariffs. For instance, semiconductors, South Korea's main export, recorded more than $14 billion - the highest-ever for July.
South Korea's Minister of Industry and Trade, Kim Jung-kwan, stated that the trade agreement with the U.S. had been finalized. The strong showing in exports was led by robust demand for products used in artificial intelligence, such as high-bandwidth memory (HBM) chips.
The surge in exports was driven by strong overseas demand for semiconductors and automobiles. Despite the tariff uncertainties, South Korean companies maintained export momentum, achieving a record-high performance for July. However, 50% duties remain in place on exports like steel and aluminum from South Korea to the United States.
The current trade agreement between South Korea and the United States sets a 15% tariff on imports from South Korea to the U.S., while U.S. goods exported to South Korea remain exempt from tariffs under the deal. South Korea agrees to invest $350 million in the U.S. and purchase $100 billion in U.S. energy products as part of the agreement.
In summary, the new trade agreement between South Korea and the United States has averted a tariff war, maintained South Korea’s export access, but imposes a partial tariff burden on South Korean goods entering the U.S., influencing export dynamics accordingly. The agreement is expected to be discussed in detail during South Korean President Lee Jae-myung's visit to the White House in the next two weeks.
- The new trade agreement between South Korea and the United States, involving a 15% tariff on imports from South Korea to the U.S., is expected to foster increased U.S. investments and energy exports to South Korea, as South Korea has agreed to invest $350 million in the U.S. and purchase $100 billion in U.S. energy products.
- The impact on South Korea’s exports is mixed, with South Korean companies maintaining export momentum in sectors like data-and-cloud-computing, such as high-bandwidth memory (HBM) chips, but also facing 50% duties on exports like steel and aluminum to the United States.
