US Plans New Tariffs on Korean Goods Due to Decline in Steel and Auto Exports

Key Takeaways

South Korea’s exports fell 0.03% to $334.7 billion in the first half of 2025, influenced by new U.S. tariffs.
Exports to the U.S. decreased by 3.7%, marking the first half-year decline since early 2020, with significant drops in steel and auto exports.
Semiconductor exports surged by 14.7%, although overall forecasts predict a continued downturn in trade for the remainder of the year.

Trade Challenges Intensify

South Korea is experiencing a decline in exports, primarily due to escalating U.S. tariffs on critical goods such as steel and automobiles. In data released by the Ministry of Trade, Industry and Energy, South Korea’s exports fell by 0.03 percent year-on-year, totaling $334.7 billion from January to June 2025. This decline is particularly concerning as new tariffs of up to 15 percent are set to take effect on July 8, escalating trade tensions.

Exports to the United States, a vital market for South Korea, dropped by 3.7 percent, representing the first half-year fall since the outbreak of the COVID-19 pandemic in early 2020. Steel shipments to the U.S. fell by 11.2 percent following the increase in tariffs from 25 percent to 50 percent within just three months. Auto exports saw an even steeper decline of 16.8 percent after a 25 percent duty was implemented on cars made in Korea in April. The general machinery sector also faced setbacks, with exports declining by 16.9 percent amid weak American industrial investments.

A senior trade ministry official noted, “The tariff shocks are now showing up clearly in the numbers,” warning that the forthcoming tariffs could be even more disruptive. These new tariffs, sanctioned under an executive order from March, will cover a range of Korean products that previously faced no duties. Although the U.S. granted a 90-day reprieve in April, officials have indicated that the tariffs will be enacted soon.

Overall, South Korea’s trade landscape is challenging, with exports also declining by 4.6 percent to China and 3.8 percent to Japan in the first half. Despite this, the semiconductor sector has emerged as a notable exception, with exports to the U.S. increasing by 14.7 percent to $73.3 billion. This surge is largely attributed to stockpiling ahead of anticipated sanctions, with semiconductors comprising 22 percent of Korea’s total exports and reaching a record $15 billion in June.

Negotiations held in Washington from June 22 to 27 did not yield a resolution. The U.S. sought amendments to Korean regulations, while South Korea argued that the newly imposed tariffs violated existing free trade agreements and threatened bilateral economic cooperation.

Forecasts for South Korea’s export performance remain pessimistic. The Korea International Trade Association predicts a further decline of 3.8 percent in the second half, projecting a total of $668.5 billion in exports for 2025, down 2.2 percent from the preceding year. Similarly, the Korea Institute for Industrial Economics & Trade forecasts a total of $670.6 billion, representing a 1.9 percent decline.

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