On January 26, U.S. President Trump threatened via social media to raise tariffs on South Korean imports like cars, lumber, and pharmaceuticals from 15% to 25%. The stated reason is the failure of South Korea’s legislature to approve a trade agreement reached in 2025. However, analysts suggest the real motive is to pressure South Korea to speed up a promised $350 billion investment package in the U.S. South Korean officials, caught by surprise, stated they would handle the matter calmly and intend to fulfill the agreement.
Impact Analysis
This is classic Trump playbook—using public tariff threats as a negotiating lever, not a final policy decision. The official reason is South Korea’s delayed ratification of a trade deal, but the real trigger is the slow pace of their promised $350B investment in the US. He’s essentially calling them out publicly to force their hand. The market is reacting predictably with a risk-off move on Korean assets, but this looks more like a shakedown than the start of a new trade war.
The threat to hike tariffs on cars and other goods to 25% is designed to create panic and force a quick resolution. I don’t see this as a structural breakdown. The most likely outcome is that Seoul provides assurances on the investment timeline, and Trump walks back the threat. The trade here is to fade the initial panic. I’m looking at the sell-off in Korean auto stocks and the won (KRW) as a potential short-term buying opportunity once the dust settles.