US President Donald Trump announces a trade deal with South Korea - Reuters
US President Donald Trump announced a new trade deal with South Korea, stating that the United States (US) would charge a 15% tariff on imports from South Korea, Reuters reported on Wednesday. The agreement includes a $350 billion commitment from South Korea toward US-owned and controlled investments.
Key quotes
The United States and South Korea have reached a full and complete trade deal.
South Korea will provide $350 billion for U.S.-owned and controlled investments, selected by the U.S. President.
South Korea will purchase $100 billion in LNG or other energy products from the U.S.
An additional investment amount from South Korea will be announced in two weeks during a White House bilateral meeting with President Lee Jae Myung.
South Korea will be fully open to trade with the U.S., including sectors like automobiles, agriculture, and trucks.
A 15% tariff will apply to South Korean goods entering the U.S., but American goods will face no tariffs in South Korea.
Tariffs FAQs
Tariffs are customs duties levied on certain merchandise imports or a category of products. Tariffs are designed to help local producers and manufacturers be more competitive in the market by providing a price advantage over similar goods that can be imported. Tariffs are widely used as tools of protectionism, along with trade barriers and import quotas.
Although tariffs and taxes both generate government revenue to fund public goods and services, they have several distinctions. Tariffs are prepaid at the port of entry, while taxes are paid at the time of purchase. Taxes are imposed on individual taxpayers and businesses, while tariffs are paid by importers.
There are two schools of thought among economists regarding the usage of tariffs. While some argue that tariffs are necessary to protect domestic industries and address trade imbalances, others see them as a harmful tool that could potentially drive prices higher over the long term and lead to a damaging trade war by encouraging tit-for-tat tariffs.
During the run-up to the presidential election in November 2024, Donald Trump made it clear that he intends to use tariffs to support the US economy and American producers. In 2024, Mexico, China and Canada accounted for 42% of total US imports. In this period, Mexico stood out as the top exporter with $466.6 billion, according to the US Census Bureau. Hence, Trump wants to focus on these three nations when imposing tariffs. He also plans to use the revenue generated through tariffs to lower personal income taxes.
Recommended Articles
