"Auto Tariffs Cut to 15% May Be Retroactive from November 1... 'MASGA' Profits to Go to Korean Companies (Comprehensive)"

US and South Korea Sign Memorandum of Understanding on Strategic Investment
Agreement Reached on Operation Plan for Total $350 Billion
"Semiconductor Tariffs Will Not Be Less Favorable Than Those for Taiwan"

With South Korea and the United States reaching an agreement on the operation plan for a total of $350 billion in strategic investments, the tariff imposed by the US on Korean goods will be reduced from 25% to 15%. Although the joint fact sheet on the countries' tariff and security negotiations does not specify the effective date for the tariff reduction, it is possible for the change to be retroactively applied as early as November 1.

The Ministry of Trade, Industry and Energy announced on November 14 that Minister Kim Jeong-Kag and US Secretary of Commerce Howard Lutnick signed the "Memorandum of Understanding on US-Korea Strategic Investment." This comes about three and a half months after a broad agreement was reached in the tariff negotiations on July 30.

Kim Jeong-Kag, Minister of Trade, Industry and Energy, is briefing on the US-Korea tariff negotiation fact sheet and the memorandum of understanding on strategic investment at the Government Seoul Office in Jongno-gu, Seoul on November 14, 2025. Photo by Jo Yongjun

The current tariffs on Korean automobiles and parts will be set at 15%, and tariffs on wood products will be adjusted to a maximum of 15%. Minister Kim explained, "With regard to the effective date of the tariff reduction, both countries have agreed that tariffs on automobiles will be retroactively applied from the first day of the month in which the legislative bill for implementing the strategic investment MOU is submitted to the National Assembly. For the reduction of tariffs on wood products, as well as mutual tariffs and exemptions for steel, aluminum, and copper used in aircraft parts, these will take effect from the date the US-Korea Strategic Investment MOU is signed."

For pharmaceuticals, which are scheduled to be subject to tariffs in the future, a maximum rate of 15% will be applied. The United States has also agreed to provide conditions for tariffs on semiconductors (including semiconductor equipment) that are no less favorable than those in any future agreement with South Korea's main competitor, Taiwan.

The $350 billion in strategic investments will consist of $200 billion in investments and $150 billion in shipbuilding cooperation investments, which include direct investment (FDI) by Korean companies, guarantees, and ship financing. Investment projects will be selected by the US President based on recommendations from the Investment Committee, chaired by the US Secretary of Commerce. The Investment Committee will consult in advance with the Consultative Committee, chaired by the Korean Minister of Trade, Industry and Energy, and will recommend only "commercially reasonable" investments to the US President. A commercially reasonable investment is defined as one in which the Investment Committee determines, in good faith, that the recovery of the invested funds is sufficiently guaranteed. The investment areas will include sectors that promote the economic and national security interests of both countries, such as shipbuilding, energy, semiconductors, pharmaceuticals, critical minerals, artificial intelligence, and quantum computing.

Project selection will be completed by January 2029, when US President Donald Trump's term ends. The profits from the $200 billion investment will be distributed equally (50:50) between South Korea and the United States until the principal and interest are repaid. After repayment, profits will be distributed at a ratio of 1:9 between South Korea and the United States, respectively.

For the "MASGA (Make American Shipbuilding Great Again)" US-Korea shipbuilding industry cooperation project, the Korean government will provide support for private investment, guarantees, and ship financing in the shipbuilding sector, either directly or through the Consultative Committee, for projects approved by the Investment Committee. Minister Kim stated, "For projects approved by the Investment Committee related to the $150 billion shipbuilding cooperation investment, the Korean government will provide support for private investment, guarantees, and ship financing in the shipbuilding sector, either directly or through the Consultative Committee," adding, "All profits generated from these projects will accrue to Korean companies."

Yeo Hangoo, Director General for Trade Negotiations, is briefing on the US-Korea tariff negotiation fact sheet and the memorandum of understanding on strategic investment at the Government Seoul Office in Jongno-gu, Seoul on November 14, 2025. Photo by Jo Yongjun

South Korea successfully defended against additional market openings in the agricultural sector during these negotiations. Yeo Hangoo, Director General for Trade Negotiations at the Ministry of Trade, Industry and Energy, emphasized, "In the agricultural sector, we took into account the sensitivities of our agricultural products, including rice and beef, and focused on thoroughly defending against any additional market openings."

The "safety and environmental standards systems," which have been considered non-tariff barriers in the automotive sector, will be improved. Under the current Free Trade Agreement (FTA) between South Korea and the United States, up to 50,000 US-made vehicles per manufacturer per year that meet US safety standards have been recognized as meeting Korean safety standards. This cap will be abolished. Director General Yeo noted, "Currently, the total number of cars imported from the United States each year does not reach 50,000 across all manufacturers," and predicted, "Given this reality, the impact of this relaxation measure on our automobile market will be limited."

The two countries agreed that the United States Trade Representative (USTR) and the Ministerial Joint Committee under the US-Korea FTA will meet within the year to finalize detailed implementation plans for non-tariff areas. Director General Yeo stated, "Despite the rapidly changing overall trade environment between South Korea and the United States, it is particularly meaningful that we will utilize the basic framework of the US-Korea FTA to proceed with follow-up measures," adding, "As the chief representative of the US-Korea FTA Joint Committee, I will do my utmost to ensure the smooth implementation of this agreement."