US Tariffs Crush South Korean Economy: Devastating 26% Trade Barrier Sparks Political Turmoil and Growth Collapse
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US Tariffs Crush South Korean Economy: Devastating 26% Trade Barrier Sparks Political Turmoil and Growth Collapse
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Today, the U.S.-South Korea trade relationship stands at a critical crossroads as a wave of new tariffs from the Trump administration reshapes the landscape. Back in April 2025, President Trump invoked emergency powers to impose a sweeping 10% tariff on all imports into the U.S. according to the White House, a move justified by concerns over persistent trade deficits and the need to bolster American manufacturing. But for key trading partners like South Korea, the measures went further. CBS News and industry trackers report that South Korean exports to the U.S. have been hit with a reciprocal tariff of 25%, later raised to 26% and specifically affecting all product categories, including vital sectors such as automotive, semiconductors, and steel.
According to Source of Asia, this 26% tariff is the highest rate the U.S. has imposed on any Free Trade Agreement partner, outpacing even Japan and the EU. The automotive sector feels the sting most acutely: South Korean automakers such as Hyundai and Kia—which shipped nearly $35 billion in vehicles to America last year—now face not only these tariffs, but the threat of much steeper rates, up to 200% on certain models.
Trade policy analysts at the Center for Strategic and International Studies note that the impact is already visible in South Korea’s economy. The Korea Development Institute recently slashed its 2025 growth forecast to below 1%, with the American tariffs cited as a key factor in the country’s unexpected first-quarter contraction. Political consequences have been swift and dramatic, culminating in the impeachment and ouster of President Yoon Suk Yeol in April. This period of economic uncertainty comes just as South Korea is grappling with broader structural challenges like a rapidly aging population and ultra-low birth rates.
Business leaders and policymakers in Seoul are scrambling to adapt. Many firms now look for workarounds such as relocating production, rethinking supply chains, or lobbying for exemptions. However, with the U.S. tariffs scheduled to remain in place until President Trump deems the trade deficit threat resolved, there is little immediate relief in sight.
Listeners, this is a fast-moving story that touches every aspect of South Korea’s export-driven economy. We’ll continue to track the headlines and impacts for you every week, so you can stay informed about how Washington’s trade policy is shaping the future for Korean businesses, workers, and consumers.
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