Executive Summary
The re-imposition of aggressive trade policies under U.S. President Donald Trump, particularly the threat of 25% tariffs on South Korean exports effective August 1, 2025, has placed South Korea in a precarious position. As a key U.S. ally with a decades-long security partnership, South Korea faces the challenge of maintaining its economic interests while preserving its strategic alignment with the United States. This report examines South Korea’s response to these tariff threats, analyzing whether Seoul is acquiescing to U.S. demands or, ironically, being pushed closer to China as a result of strained trade relations. Drawing on recent developments, the report highlights South Korea’s diplomatic efforts, economic strategies, and regional dynamics, concluding that Seoul is pursuing a delicate balancing act to negotiate with the U.S. while cautiously deepening ties with China and other regional partners to hedge against uncertainty.
Background
President Trump’s trade policy, characterized by “reciprocal” tariffs aimed at addressing U.S. trade deficits, has targeted South Korea, among other nations, with a 25% tariff on exports such as cars, steel, and electronics, set to take effect on August 1, 2025. These measures build on earlier tariffs imposed during Trump’s first term, which included a 25% tariff on steel and a 10% tariff on aluminum, though South Korea secured exemptions in 2018 through negotiations. The current policy, framed as a response to “unfair trade barriers” and trade deficits ($66 billion with South Korea in 2024), also includes demands for increased defense spending and greater market access for U.S. automobiles. South Korea, heavily reliant on exports to the U.S. (a major market for its automotive and electronics industries), faces significant economic risks, prompting a multifaceted response.
South Korea’s Response
Negotiation and Economic Support
Diplomatic Engagement with the United StatesSouth Korea has prioritized diplomacy to mitigate the impact of Trump’s tariffs, emphasizing its long-standing alliance with the U.S. The administration of President Lee Jae-myung, in office since mid-2025, has taken a non-confrontational stance, explicitly rejecting retaliation or alignment with China and Japan to counter U.S. tariffs. Key actions include:
- High-Level Negotiations: South Korea dispatched its top trade negotiator, Yeo Han-koo, and national security adviser, Wi Sung-lac, to Washington to engage with U.S. Trade Representative Jamieson Greer and other officials. These talks aim to secure a trade deal before the August 1 deadline
- Economic Concessions: Seoul has signaled willingness to address U.S. concerns about trade deficits by improving domestic regulations and offering cooperation in sectors like shipbuilding.
- Defense Contributions: In response to Trump’s demands for increased defense spending, South Korea is exploring compromises, including higher contributions for the 28,500 U.S. troops stationed in the country.
Acting President Han Duck-soo (prior to Lee’s election) emphasized negotiation over confrontation, stating, “Fighting back will not improve the situation,” and underscored the historic U.S.-South Korea alliance. This approach reflects Seoul’s intent to preserve the security partnership, which is critical given regional threats from North Korea and China.
Domestic Economic Measures
To cushion the impact of potential tariffs, South Korea has implemented measures to support its export-driven industries, particularly automakers like Hyundai and Kia, which rely heavily on the U.S. market. The government announced support packages to mitigate losses from tariffs, focusing on sectors like semiconductors, steel, and automobiles. These measures aim to stabilize the economy while negotiations continue, signaling a pragmatic approach to weathering the trade storm.
Regional Trade Diversification
Recognizing the risks of over-reliance on the U.S. market, South Korea has explored diversifying trade partnerships. President Lee sent envoys to Australia and Germany to discuss trade and defense cooperation, with plans to engage other nations. Additionally, South Korea participated in a trilateral economic dialogue with China and Japan in March 2025, the first in five years, to promote regional trade and strengthen the Regional Comprehensive Economic Partnership (RCEP). This dialogue reflects a strategic effort to bolster economic ties within Asia, particularly with China, its largest trading partner.
Bending to U.S. Pressure or Shifting Toward China?
Evidence of Bending to U.S. Demands
South Korea’s response leans heavily toward accommodating U.S. demands, driven by its strategic dependence on the U.S. for security. The following points highlight Seoul’s efforts to align with Washington:
- Non-Retaliatory Stance: South Korea’s explicit rejection of retaliatory tariffs or coordination with China and Japan to counter U.S. policies underscores its commitment to maintaining the U.S. alliance.
- Active Negotiations: The dispatch of senior officials to Washington and the focus on item-by-item negotiations (e.g., steel and automobiles) demonstrate a willingness to meet U.S. demands, at least partially.
- Defense Cooperation: Seoul’s openness to increasing defense contributions aligns with Trump’s broader demands, reinforcing the security partnership.
This approach is consistent with South Korea’s historical strategy of leveraging its alliance with the U.S. to secure economic and security benefits. For instance, during Trump’s first term, South Korea successfully renegotiated the U.S.-Korea Free Trade Agreement (KORUS FTA) to avoid steel tariffs, a precedent that informs current efforts.
Potential Shift Toward China
Despite its focus on U.S. negotiations, South Korea’s actions suggest a cautious pivot toward China and regional partners as a hedge against U.S. trade unpredictability. Key indicators include:
- Strengthening Regional Ties: The March 2025 trilateral dialogue with China and Japan, and the emphasis on RCEP, signal South Korea’s interest in deepening economic cooperation with China, which accounts for a significant portion of its trade ($300 billion in 2024).
- China’s Strategic Outreach: Beijing has actively courted South Korea, Japan, and ASEAN nations to counter Trump’s tariffs, positioning itself as a champion of free trade. While South Korea has downplayed Chinese reports of coordinated resistance, the economic dialogue suggests openness to closer ties.
- Economic Pragmatism: South Korea’s trade-dependent economy cannot afford to alienate China, its largest trading partner. The RCEP framework and potential trilateral FTA with China and Japan provide avenues to offset losses from U.S. tariffs.
However, South Korea’s alignment with China is tempered by geopolitical realities. China’s aggressive military actions, such as exercises around Taiwan and disputes in the South China Sea, raise concerns in Seoul about Beijing’s intentions. Additionally, South Korea’s security alliance with the U.S., including joint military exercises and the presence of U.S. troops, limits the extent to which Seoul can tilt toward Beijing without risking its defense posture.
Irony of U.S. Policy
Trump’s aggressive trade policy, intended to counter China’s economic influence, may inadvertently push South Korea closer to Beijing. By targeting key U.S. allies like South Korea with tariffs, the U.S. risks fraying strategic partnerships critical to its Indo-Pacific strategy. South Korea’s participation in regional trade frameworks like RCEP and its dialogue with China and Japan suggest that Seoul is hedging its bets, seeking economic stability through diversified partnerships. This dynamic is particularly ironic given the U.S.’s reliance on South Korea and Japan to counter China’s regional influence, including through initiatives like the First Island Chain strategy.
Analysis
South Korea’s response reflects a strategic balancing act rather than a clear shift toward either the U.S. or China. The government’s priority is to secure a trade deal with the U.S. to avoid or reduce tariffs, as evidenced by its diplomatic efforts and non-retaliatory stance. However, the uncertainty of Trump’s “unpredictable predictability” (as described by Heo Yoon, chairman of South Korea’s National Trade Policy Advisory Council) has prompted Seoul to explore regional alternatives, particularly with China. This dual approach is driven by economic necessity—South Korea’s export-driven economy cannot withstand prolonged trade disruptions—and geopolitical caution, given its reliance on U.S. security guarantees.
The irony lies in the potential for Trump’s tariffs to undermine U.S. strategic goals. By straining relations with South Korea, the U.S. risks weakening a key ally in its efforts to contain China. South Korea’s cautious engagement with China, while not a full pivot, reflects a pragmatic response to economic pressures rather than a strategic realignment. However, if U.S. tariffs persist or escalate, South Korea may be forced to deepen economic ties with China, particularly through frameworks like RCEP, which could dilute U.S. influence in the region over time.
Conclusion
South Korea is responding to Trump’s aggressive trade policy with a combination of diplomatic engagement, economic support measures, and regional trade diversification. While Seoul is bending to U.S. pressure by prioritizing negotiations and avoiding retaliation, it is also cautiously strengthening ties with China and other regional partners to mitigate economic risks. This dual strategy reflects South Korea’s attempt to preserve its U.S. alliance while hedging against trade uncertainties. However, the irony of Trump’s policy is that it may inadvertently push South Korea closer to China economically, potentially undermining U.S. strategic objectives in the Indo-Pacific. The outcome will depend on the success of ongoing U.S.-South Korea negotiations and the broader trajectory of regional trade dynamics.
Recommendations
- Accelerate U.S. Negotiations: South Korea should leverage its alliance with the U.S. to secure a favorable trade deal before August 1, 2025, focusing on concessions in steel, automobiles, and defense contributions.
- Strengthen Regional Frameworks: Continue engaging with China and Japan through RCEP and trilateral trade talks to diversify export markets, but maintain a balanced approach to avoid antagonizing the U.S.
- Enhance Domestic Resilience: Expand support for industries vulnerable to tariffs, such as semiconductors and automakers, to ensure economic stability during trade uncertainties.
- Monitor Geopolitical Risks: Carefully assess China’s military actions and their implications for South Korea’s security, ensuring that economic cooperation does not compromise strategic alignment with the U.S.
