South Korea rushes to match US-Japan trade deal ahead of tariff deadline

A day after Japan clinched a trade deal with the United States that lowers tariffs and unlocks investment flows, South Korea is now scrambling to secure a similar or better outcome, fearing economic fallout if left behind. With just days to go before an August 1 deadline, Seoul's top trade negotiators are headed to Washington to engage in high-level talks with US officials. The goal is to avoid steep 25 per cent reciprocal tariffs and secure a deal that keeps Korea globally competitive.

The urgency stems from Japan’s newly signed pact with the US, which lowers tariffs on Japanese imports to 15 per cent, down from a proposed 25 per cent, and includes a sweeping $550 billion Japanese investment pledge into the US economy.

What did Seoul say?

South Korean Industry Minister Kim Jung-kwan, before boarding his flight to Washington, vowed a proactive response. “We will make an all-out effort to produce a positive-sum result that will allow Korea–US industrial and energy cooperation to be upgraded to the next level,” he said in a statement, as quoted by Reuters.

He acknowledged the deal could have a “significant economic impact” and stressed the need to protect sensitive Korean industries. Kim is expected to meet with US Commerce Secretary Howard Lutnick and Energy Secretary Chris Wright, in talks that may shape the economic direction of Asia’s fourth-largest economy.

Japan's deal effect on Seoul

Japan’s deal has created ripples across Seoul’s financial markets and policymaking circles. The KOSPI index dipped 0.3 per cent on Wednesday, but shares of major Korean automakers, including Hyundai Motor (+6.8 per cent) and Kia (+6.4 per cent) rallied, riding expectations of a favourable outcome.

Still, analysts warn that Japan’s agreement could become the benchmark, making Seoul’s negotiating position more difficult. “Investors see the Japan–US deal as a benchmark for the Korean deal,” said Kim Sung-rae, an analyst at Hanwha Investment & Securities, adding that Korean officials would be under pressure “to come up with a similar, or better, deal.”

No rice or beef on the table

In terms of concessions, South Korea is unlikely to open its rice and beef markets, two politically sensitive sectors. Instead, as per Yonhap News Agency, Seoul is reportedly willing to expand imports of US biofuel crops, such as corn for bioethanol, and increase energy and tech cooperation.

According to Professor Kim Yong-jin of Sogang University, matching or beating Japan’s deal won’t be easy. “It will be difficult for South Korea to have US tariff rates lower than 15 per cent on Japan and 10 per cent on Britain,” he told Reuters. He added that, like Japan, Korea may have to import more agricultural goods and energy and boost outbound investments to seal a deal.

The Trump angle

On social media platform Truth Social, US President Donald Trump hailed the Japan agreement, saying it would expand access for American cars, trucks, rice, and other farm goods, while also touting massive Japanese investments in US manufacturing.

Trump has made it clear that allies who help rebuild the US industrial base will get preferential trade treatment. Last week, Chosun Ilbo reported that Washington had asked South Korea to set up a large-scale investment fund to aid in US factory reconstruction though no official source was cited.

Seoul’s next move

The road ahead won’t be easy. South Korea competes directly with Japan in automobiles, semiconductors, and steel, all sectors under scrutiny in Washington. Seoul’s trade team will need to walk a tightrope between protecting domestic interests and securing market access.

Newly elected President Lee Jae Myung has made clear that he wants “no comparative disadvantage” in trade agreements. For now, the outcome of this Washington visit could decide more than just tariffs. It could determine how South Korea positions itself in a fast-changing, protectionist global trade order.

(With inputs from the agencies)