This new agreement follows Japan's treaty that it will receive a 15% rate from the US, raising the stakes on South Korea not having to pay a more punitive level.
South Korea's deal is not just about the reduced tariff rate but also a promise to invest $350 billion (about £264.1 billion) in the United States.
The 15%tariff will hit South Korea's biggest American exports — cars and semiconductors. But other major sectors such as steel and aluminium will continue to be subject to a 50% tariff, which reflects the international norm introduced by Trump.
Nonetheless, South Korean President Lee Jae Myung has called the deal a success, saying that it provides the country with fair, if not favorable, treatment to other countries.
Key Wins for South Korea, No Ag Gain on Agriculture
The main victory for South Korea with the deal was ensuring it kept its tough agricultural policies. Seoul did not open its rice and beef markets to more United States imports, something that had been a possible sticking point.
The South Korean government maintains tough restrictions on American rice and beef to protect local farmers, and farmers were poised to protest if the rules were relaxed.
The US is also investing in South Korea in a big way, which is another important part of the deal. And of the $350 billion promised, $150 billion will fund American shipbuilding, which includes the construction of warships.
This is in line with South Korea's shipbuilding prowess — it is the world's second biggest shipbuilder after China. The investment will bolster the beleaguered American shipbuilding industry while bolstering South Korea's.
The remainder of the promised investment consists of money already committed under the previous US administration, but which remains to be delivered. The funding would increase production of electric vehicle (EV) batteries, semiconductors, and vehicles in the US.
Military Links Unscathed, More Talks to Come
The trade agreement has no bearing on the long-standing military alliance between the US and Korea. South Korea still receives billions in U.S. dollars to help defend the country against possible threats, especially those from North Korea.
In the past, President Trump has insisted that Seoul pay more for American military support, even threatening to remove troops. These matters weren't covered in the final trade deal, but they will be discussed in two weeks, when President Lee travels to Washington for another summit with Mr. Trump.
Trump has imposed new tariffs on a range of countries and industries since taking office in January. He says these measures are required to resuscitate American production and save American jobs.
But the president's trade policy has disrupted the global economy. But critics caution that those tariffs could lead to higher prices for American consumers and damage global trade relationships.
