As Bob Dylan said, “the times they are a-changin’.” The United States–Korea Free Trade Agreement (KORUS), finalized in April 2007, was hailed as a hallmark of free trade and globalization. KORUS aimed to eliminate 95% of tariffs between the United States and South Korea within five years of its ratification. The consensus in Washington was that, given the strategic partnership and economic complementarity, free trade between the U.S. and South Korea was here to stay.
The renewed global trade war, marked by tariffs announced in 2025, has changed seriously the equation. KORUS was renegotiated in 2018 during the first Trump administration. The U.S. later brought a complaint under the revised KORUS in 2019. Things reached a crescendo on April 2, 2025, when President Trump announced that he would impose a 25% unilateral tariff on South Korea.
Tariffs were later paused for 90 days, with the pause originally set to expire on July 8, 2025. The pause period was later extended to August 1, 2025, just 10 days after this writing. What follows will likely shape key compliance and cost considerations for companies with exposure to U.S.–Korea trade flows
Analysis
If a deal is not reached, the 25% tariff will apply to virtually all goods imported to the U.S. from South Korea. This 25% tariff is based on Section 232 of the Trade Expansion Act of 1962, which allows the President to adjust imports of goods that threaten to impair national security. Unlike WTO-sanctioned tariffs, Section 232 allows the President to act unilaterally. Notably, these tariffs apply to Korean steel, autos, and EV-battery, all of which have some national-security implications.
The tariffs could have major implications for the auto sector. Hyundai alone is planning to invest $21 billion in the United States between 2025 and 2028, with an aim to create 14,000 direct jobs and more than 100,000 indirect jobs. Steep tariffs on imported components could have major implications for this investment. To address the potential fallout, the Korean government has already announced additional policy support for auto makers.
The auto sector is not alone. The semiconductor industry—and industries that rely on access to semiconductors—could also be impacted. South Korea exported $1.47 billion worth of semiconductors to the United States in 2023. Samsung Electronics and SK Hynix accounted for approximately 50% of global market share in NAND flash memory chips in 2022, as cited in a National Bureau of Asian Research (NBR) report. Many US companies, including Detroit automakers, rely on Korean-origin semiconductors to support their EV businesses.
Clean tech, already under fire, could also be impacted by the tariffs. According to Business Insider, South Korean companies were expected to invest up to $55 billion in U.S. projects related to the Inflation Reduction Act (IRA), much of this related to the automotive sector. Increased tariffs on components could have a major impact on this investment.
Conclusion
Businesses with Korean supply-chain exposure must carefully monitor KORUS-related trade negotiations. South Korea is a major supplier to the U.S. of autos, auto parts, semiconductors, batteries and other clean tech. In all of these sectors, it is the main alternative to China, a long-standing U.S. trade rival. Absent a broader deal by August 1, companies could see higher costs and disrupted supply chains. With the deadline fast approaching, firms with cross-border supply chains must plan accordingly.
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Disclaimer: This blog is for informational purposes only and does not constitute legal advice. Reading or interacting with this content does not create an attorney–client relationship. You should consult a qualified attorney for advice regarding your specific situation. Mehaffy, PLLC disclaims all liability for actions taken or not taken based on this blog.