Six months ago, Donald Trump and South Korean President Lee Jae Myung stood together and announced what the White House called a historic trade agreement—$350 billion in Korean investment flowing into American shipyards and factories, in exchange for reduced tariffs on Korean exports. It was the kind of deal Trump loves to celebrate: big numbers, clear winners, a handshake for the cameras.

On January 26, he threatened to tear it up.

Trump announced he was raising tariffs on South Korean automobiles, lumber, pharmaceuticals, and other goods from 15 percent to 25 percent, blaming Seoul's National Assembly for refusing to ratify the framework he and Lee agreed to last July. The move snaps duties back to the punishing rate Trump had threatened before the deal was struck—and serves as a warning to other nations whose legislatures have been slow to formalize agreements with Washington.

"Our Trade Deals are very important to America," Trump wrote on Truth Social. "In each of these Deals, we have acted swiftly to reduce our TARIFFS in line with the Transaction agreed to. We, of course, expect our Trading Partners to do the same."

Seoul said it received no advance warning.

A Deal That Never Quite Closed

The July framework was supposed to work like this: South Korea would invest $350 billion in American strategic industries over several years, with $150 billion designated for shipbuilding. Korean Air would buy $36.2 billion in Boeing aircraft. Seoul would purchase $100 billion in U.S. liquefied natural gas. In return, Trump would cut tariffs on Korean goods to 15 percent, down from the 25 percent he had been threatening.

Both presidents reaffirmed the terms when Trump visited South Korea in late October. The reduced tariff rate took effect November 1.

But the agreement required legislative approval in Seoul, and that's where it stalled.

South Korea's ruling Democratic Party of Korea argues the memorandum of understanding isn't a binding treaty—the document itself states it "does not create legally binding rights and obligations." Party leaders worry that formal ratification would lock Seoul into terms it might later want to renegotiate. They've proposed a separate bill to authorize the investments rather than ratifying the agreement directly.

The opposition People Power Party counters that the National Assembly must vote on any deal involving hundreds of billions of dollars in commitments. Parliament begins a new session February 3, when legislation typically comes up for a vote.

Beyond the political maneuvering lies a harder problem: South Korea may not be able to afford what it promised.

Finance Minister Koo Yun-cheol told reporters earlier this month that the $350 billion investment package was unlikely to begin in the first half of 2026. The won has cratered to levels not seen since the global financial crisis, and the prospect of massive dollar outflows has Seoul's economic policymakers deeply worried. The original deal tried to address this by capping annual cash transfers at $20 billion, but even that may be more than the Korean economy can absorb right now.

Scrambling in Seoul

Trump's announcement landed heavy in South Korea's capital.

The presidential Blue House said there had been "no official notice or explanation about the details" from Washington. Industry Minister Kim Jung-Kwan, who happened to be in Canada, was dispatched to meet with Commerce Secretary Howard Lutnick. Presidential adviser Kim Yong-beom convened an emergency meeting with economic ministries.

Deputy Prime Minister Koo pledged to seek parliamentary support for a major investment bill. "Will request help from the Parliament for swift approval," he said, a notable shift in tone from an administration that had been content to let the ratification process drift.

Markets gyrated. Hyundai Motor shares plunged nearly 5 percent before recovering to close down less than 1 percent. Kia dropped 3.5 percent. The won slid half a percent against the dollar in early trading.

Choi Seok-young, a former South Korean trade negotiator, read Trump's message as "maximum pressure" designed to extract concessions in ongoing talks over non-tariff barriers, including Seoul's recent regulatory actions against Coupang, the U.S.-listed e-commerce giant that has accused Korean authorities of discrimination.

Whatever prompted it, the message was clear enough: Trump expects his deals honored, and he's willing to inflict economic pain on allies who don't deliver.

The Tariff President

South Korea is hardly alone in discovering that a handshake with Trump doesn't guarantee stability.

Just last week, the president threatened tariffs on eight European nations unless the United States gained control of Greenland, then backed off after meetings at Davos. On Saturday, he warned of 100 percent duties on Canada if Prime Minister Mark Carney pursued closer trade ties with China. Carney promptly denied any such intention.

The European Parliament still hasn't ratified its own trade framework with Washington. The USMCA agreement with Canada and Mexico faces renegotiation this year. And the Supreme Court is weighing whether Trump exceeded his authority by declaring tariffs under the International Emergency Economic Powers Act—a ruling that could reshape his leverage entirely.

Josh Lipsky, who chairs international economics at the Atlantic Council, said the South Korea move underscores a fundamental reality of Trump's trade policy.

"It's just another reminder that the markets were wrong to believe we were going to get into tariff stability in 2026," he said.

For South Korean automakers, the stakes are enormous. The country shipped $30.2 billion worth of vehicles to the United States last year, accounting for a quarter of all Korean exports to America. Hyundai and Kia have built their North American strategy around competitive pricing—a calculus that falls apart at 25 percent tariffs.

General Motors, which manufactures roughly 500,000 vehicles annually in South Korea and exports most of them stateside, faces similar exposure.

The broader trade relationship is substantial. South Korea sent $122.9 billion in goods to the United States in 2025, making it one of America's largest trading partners. Much of that trade flows through supply chains that have taken decades to build—and that could take years to unwind if the tariff war escalates further.

Trump framed his decision as a matter of reciprocity. He moved fast to lower American tariffs when the deal was announced. Seoul didn't hold up its end.

"Why hasn't the Korean Legislature approved it?" he asked.

The answer involves domestic politics, constitutional debates, currency instability, and genuine uncertainty about whether the terms are even achievable. None of that matters much to a president who measures success in signed agreements and investment announcements.

South Korea now has a choice: find a way to satisfy Washington, or learn to live with tariffs that could reshape its export economy for years to come.