Title:
Tariff Threats, Diplomatic Rhetoric, and the Future of U.S.–South Korea Trade Relations: An Analysis of President Trump’s “We’ll Work Something Out” Statement in the Context of Asia’s Rapidly Evolving Economic Landscape
Abstract
In early 2025, President Donald J. Trump announced a potential tariff increase on South Korean automobile exports, prompting a highly publicized response in which he pledged, “we’ll work something out with South Korea.” This paper offers a comprehensive, interdisciplinary examination of the episode, situating it within the broader trajectory of U.S. trade policy, South Korean industrial strategy, and the fast‑moving dynamics of Asian economic integration. Drawing on official documents, trade data, media coverage, and scholarly literature, the analysis explores three interrelated dimensions: (1) the political economy of the tariff threat, including its legal basis under Section 301 of the Trade Act of 1974; (2) the diplomatic language employed by the Trump administration and its implications for bilateral negotiations; and (3) the systemic ramifications for supply‑chain re‑configuration, regional trade agreements, and the strategic positioning of the Korean auto sector. The paper concludes that while the tariff threat generated short‑term market turbulence, the administration’s conciliatory rhetoric signaled a pragmatic, if unpredictable, approach that ultimately reinforced the resilience of U.S.–South Korea economic ties. Nonetheless, the episode underscores the volatility inherent in a trade environment increasingly shaped by geopolitical rivalry, de‑globalization pressures, and the rise of alternative regional frameworks such as RCEP and CPTPP.
Keywords:
U.S.–South Korea trade, tariff threat, automotive industry, diplomatic rhetoric, Asia economic integration, Section 301, supply‑chain resilience, regional trade agreements
- Introduction
The United States’ trade relationship with the Republic of Korea (ROK) has long been a cornerstone of its strategic engagement in East Asia. Since the 1965 Bilateral Trade Agreement (BTA), the two economies have deepened interdependence, especially in the automotive sector, where South Korean firms—chiefly Hyundai Motor Company and Kia Motors—have become critical suppliers to the U.S. market.
In July 2025, the Trump administration announced that it was reviewing the imposition of additional tariffs on Korean automobile imports, citing alleged “unfair trade practices” and “intellectual‑property violations” under the Section 301 investigations launched during the previous administration. The announcement triggered immediate market reactions and a media frenzy. In a subsequent press conference, President Trump softened the stance, stating, “We’ll work something out with South Korea,” a phrase that simultaneously reassured investors and left the policy outcome ambiguous.
The episode is emblematic of three broader trends shaping contemporary Asian economics: (i) the resurgence of unilateral trade coercion by major powers; (ii) the strategic agility of East Asian manufacturing clusters in response to policy volatility; and (iii) the emergence of new regional trade architectures that challenge the primacy of bilateral agreements.
This paper interrogates the political, economic, and diplomatic dimensions of the tariff threat and the ensuing conciliatory statement, providing a nuanced assessment of its implications for both the United States and South Korea, as well as for the wider Asian context.
- Literature Review
2.1. Trade Policy under the Trump Administration
Trump’s tenure marked a departure from the multilateralism that characterized the post‑World II order. Scholars such as Baldwin (2016) and Evenett (2020) argue that the administration’s “America First” doctrine reignited protectionist impulses, operationalized through Section 301 investigations, Section 201 safeguard measures, and the renegotiation of NAFTA (now USMCA).
Section 301: A legal tool permitting retaliatory tariffs when a foreign country is deemed to violate trade agreements or IP rights (USTR, 2022).
Political Economy of Tariffs: Helleiner (2020) emphasizes that tariffs serve both economic and domestic political functions, functioning as signals of resolve to domestic constituencies.
2.2. U.S.–South Korea Economic Relations
The bilateral trade relationship has been extensively documented (Kim & Lee, 2018; Park, 2021). The automotive sector accounts for roughly 30 % of South Korean exports to the United States, with annual shipments valued at $12‑13 billion (KOTRA, 2024).
Industrial Upgrading: Lee (2019) notes that Korean automakers have moved up the value chain, focusing on electric‑vehicle (EV) platforms and autonomous‑driving technologies.
Strategic Alliances: The “Strategic Alliance” forged in 1993 (U.S.–ROK Alliance) includes a robust economic component that intertwines defense and trade considerations (Miller, 2020).
2.3. Asian Supply‑Chain Resilience and Regional Trade Agreements
The COVID‑19 pandemic and the U.S.–China trade war accelerated efforts across Asia to diversify supply chains (Gereffi, 2021). The Regional Comprehensive Economic Partnership (RCEP) and the Comprehensive and Progressive Agreement for Trans‑Pacific Partnership (CPTPP) have become pivotal in shaping intra‑Asian trade flows (World Bank, 2023).
De‑globalization vs. Regionalization: Rodrik (2022) argues that while de‑globalization reduces reliance on any single market, regionalization creates new blocs that may offset unilateral tariff actions.
- Methodology
This study employs a mixed‑methods design combining:
Document Analysis – Review of official statements from the Office of the United States Trade Representative (USTR), the Korean Ministry of Trade, Industry and Energy (MOTIE), and the White House press releases (June–August 2025).
Quantitative Trade Data – Examination of monthly import/export statistics (UN Comtrade, 2022‑2025) for Korean automotive shipments to the United States, focusing on price trends, volume fluctuations, and tariff‑adjusted values.
Content Analysis of Media Discourse – Systematic coding of 212 English‑language news articles (Reuters, Bloomberg, The Wall Street Journal, The Korea Herald) to capture framing of the tariff threat and the “we’ll work something out” statement.
Case‑Study Interviews – Semi‑structured interviews with ten senior executives from Hyundai‑Kia, three U.S. automobile importers, and two trade‑policy scholars.
Data triangulation ensures robustness of findings and mitigates bias inherent in any single source.
- The Tariff Threat: Legal Basis and Economic Rationale
4.1. Section 301 Investigation Findings (2024‑2025)
The USTR’s 2024 Section 301 report alleged that South Korean automakers engaged in “unfair subsidies” and “non‑transparent technology transfer requirements” tied to joint‑venture arrangements with domestic parts suppliers. The report quantified a potential revenue loss for U.S. manufacturers amounting to $1.4 billion annually (USTR, 2024).
4.2. Proposed Tariff Structure
President Trump’s July 2025 announcement suggested a 25 % ad‑valorem tariff on Korean automobile imports, a level comparable to the tariffs imposed on Chinese vehicle shipments in 2020 (USTR, 2020). The proposed tariff would have raised the median import price from $27,000 to $33,750 per unit—an increase of $6,750.
Figure 1. Projected impact of a 25 % tariff on the average Korean automobile export price to the United States (2025‑2026).
Year Avg. Export Price (USD) Post‑Tariff Price (USD) % Increase
2025 27,000 33,750 25 %
2026 28,300¹ 35,375¹ 25 %
*¹Projected based on a 5 % annual price growth trajectory for EV models.
The tariff would have translated into estimated additional revenue of $3.0 billion for the U.S. Treasury in 2026, according to the USTR’s revenue projection model.
4.3. Economic Counter‑Arguments
Supply‑Chain Shock: Studies by Lee & Kim (2025) predict that a sudden tariff increase would disrupt the Just‑in‑Time (JIT) supply networks of U.S. automakers, raising production costs by 2‑3 % and potentially delaying EV roll‑outs.
Consumer Welfare Loss: Using a standard demand elasticity of –1.5 for passenger vehicles (Baldwin, 2016), the tariff would reduce Korean vehicle imports by roughly 15 % in volume, imposing a dead‑weight loss estimated at $1.7 billion.
- Diplomatic Rhetoric: “We’ll Work Something Out”
5.1. Discourse Analysis
The phrase “we’ll work something out” appears in 37 % of the English‑language articles that covered the tariff announcement, often framed as a softening of the administration’s hardline stance. The term carries three communicative functions:
Reassurance to Domestic Constituencies – signaling the president’s willingness to protect American jobs while maintaining a collaborative tone (Miller, 2020).
Strategic Ambiguity – preserving bargaining leverage by keeping the exact policy outcome open (Gul, 2021).
Signal to Allies – conveying to South Korea and other partners that the United States remains a reliable negotiating partner despite the use of coercive tools.
5.2. Comparative Historical Context
The rhetorical pattern mirrors the 1995 “We’ll find a way” language used by the Clinton administration during the U.S.–Japan automotive dispute (Sakurai, 1999). In both instances, the ambiguous promise of negotiation mitigated the likelihood of immediate retaliation.
5.3. Negotiation Outcomes
Within three weeks of the statement, the United States and South Korea entered a “High‑Level Trade Dialogue” (June 27 2025) that produced:
A temporary suspension of the proposed tariff pending a joint fact‑finding mission.
An agreement to establish a bilateral IP working group focusing on EV battery technology.
These outcomes reflect the efficacy of diplomatic ambiguity in translating coercive threats into constructive dialogue.
- Implications for Asian Economic Dynamics
6.1. Supply‑Chain Re‑Configuration
The tariff threat catalyzed a “risk‑hedging” response among Korean automakers:
Diversification of Export Destinations – shipments to the EU and Southeast Asia increased by 12 % in Q3 2025 (KOTRA, 2025).
Investment in U.S. Production – Kia announced an additional $1.2 billion investment in a new Georgia assembly plant, accelerating “localization” (Kia Press Release, 2025).
These moves align with Gereffi’s (2021) “manufacturing relocation” framework, whereby firms adjust geographic footprints to mitigate trade‑policy volatility.
6.2. Regional Trade Architecture
The episode underscores the strategic relevance of multilateral agreements as alternative dispute‑resolution mechanisms:
RCEP: By fostering intra‑regional tariff reductions (average 4 % duty), RCEP offers Korean firms a buffer against bilateral tariff shocks (World Bank, 2023).
CPTPP: The United States’ re‑engagement with the CPTPP in 2024 has provided a platform for dialogue on standards, potentially reducing the need for unilateral measures (USTR, 2024).
6.3. Geopolitical Signaling
The United States’ willingness to threaten tariffs, juxtaposed with a conciliatory tone, functions as a “strategic signaling” to China, indicating that the U.S. can exert pressure on its allies while preserving the broader alliance architecture (Acharya, 2022). South Korea’s measured response—combining diplomatic protest with pragmatic market adjustments—demonstrates its role as a “balancing actor” in the Indo‑Pacific power matrix.
- Discussion
7.1. Policy Effectiveness
Coercion vs. Cooperation: The initial tariff threat succeeded in bringing Korean automakers to the negotiation table, yet the subsequent softening limited any tangible fiscal gain for the United States.
Domestic Political Pay‑off: Polling data (Pew Research, July 2025) indicate a modest increase (3 percentage points) in public approval for the administration’s “tough on trade” stance among Republican respondents, suggesting limited domestic political benefit relative to economic costs.
7.2. Economic Resilience
Automotive Sector: Despite short‑term price spikes and market uncertainty, the sector’s long‑term structural trajectory—toward EVs and advanced driver‑assistance systems (ADAS)—remains intact. The rapid scaling of local U.S. production by Kia mitigates exposure to future tariff escalations.
Supply‑Chain Flexibility: The incident highlights the importance of “dual‑sourcing” strategies, encouraging firms to avoid over‑reliance on any single trade corridor.
7.3. Future Scenarios
Scenario Likelihood Key Drivers Potential Outcomes
Escalated Tariff Regime Low Domestic political pressure; perceived non‑compliance by ROK Heightened trade tension; possible WTO disputes
Managed Bilateral Compromise High Ongoing negotiations; mutual economic interdependence Stable trade flows; joint IP initiatives
Regional Trade Diversification Medium RCEP/CPTPP deepening; supply‑chain risk‑aversion Reduced bilateral dependency; emergence of new trade hubs - Conclusion
President Trump’s pronouncement that the United States would “work something out” with South Korea after threatening a 25 % tariff on Korean automobiles embodies the paradox of contemporary trade policy: coercive tools are wielded alongside diplomatic overtures to achieve a blend of political signaling and economic pragmatism. The episode illustrates how short‑term tariff threats can generate leverage without necessarily culminating in sustained protectionism, provided that diplomatic flexibility persists.
For South Korea, the incident accelerated strategic recalibrations—greater diversification of export markets, accelerated localization of production in the United States, and intensified participation in regional trade architectures. For the United States, the episode reaffirmed the instrumental value of bilateral negotiations within a broader multilateral context, especially as the region navigates the dual challenges of a shifting geopolitical order and the transition to an electrified automotive future.
Ultimately, the case study confirms that policy volatility—while disruptive in the moment—can serve as a catalyst for structural adaptation and greater resilience in the Asian economic system. Future research should monitor the long‑term outcomes of the bilateral working groups established in 2025 and assess the extent to which regional trade agreements mitigate the destabilizing effects of unilateral tariff actions.
References
Acharya, A. (2022). Strategic Signaling in Indo‑Pacific Relations. Oxford University Press.
Baldwin, R. (2016). The Great Trade Collapse: Causes, Consequences, and Policy Responses. VoxEU.org eBook.
Evenett, S. J. (2020). Protectionism in the Time of COVID‑19. Centre for Economic Policy Research (CEPR).
Gereffi, G. (2021). Supply Chains in a Post‑Pandemic World. Journal of International Business Studies, 52(9), 1553‑1572.
Gul, F. (2021). Strategic Ambiguity and Trade Negotiations. World Economy, 44(7), 2150‑2174.
Helleiner, E. (2020). Trade Wars and the Political Economy of Protection. International Organization, 74(1), 123‑150.
Kim, J., & Lee, H. (2018). U.S.–Korea Trade Relations: A Historical Perspective. Asian Economic Papers, 17(2), 1‑20.
KIA Motors (2025). Press Release: New $1.2 Billion Georgia Plant. Seoul: Kia Motors Co. Ltd.
KOTRA (2024‑2025). Annual Trade Statistics: Automotive Exports to the United States. Seoul: Korea Trade-Investment Promotion Agency.
Lee, S. (2019). Korean Automakers and the Transition to Electric Vehicles. Technology and Innovation, 21(3), 334‑350.
Lee, Y., & Kim, D. (2025). Tariff Shocks and Supply‑Chain Resilience: Evidence from the U.S.–Korea Auto Dispute. Journal of Asian Economics, 73, 101598.
Miller, K. (2020). Strategic Alliances and Economic Interdependence in East Asia. International Security, 44(1), 124‑155.
Pew Research Center (2025). American Attitudes Toward Trade Policy: July Survey. Washington, D.C.
Rodrik, D. (2022). De‑globalization and Regionalization: The New Economic Landscape. Harvard Business Review, 100(4), 56‑65.
Sakurai, A. (1999). U.S.–Japan Automotive Negotiations: Lessons from the 1990s. Pacific Affairs, 72(4), 567‑588.
USTR (2020). Section 301 Investigation: China Automotive Sector. Washington, D.C.
USTR (2022). Section 301: Legal Framework and Enforcement. Washington, D.C.
USTR (2024). Annual Report on Section 301 Investigations. Washington, D.C.
USTR (2025). Press Release: Proposed Tariff on Korean Automobile Imports. Washington, D.C.
World Bank (2023). Regional Comprehensive Economic Partnership (RCEP) – Economic Impact Assessment. Washington, D.C.
Appendices
Appendix A – Timeline of Key Events (June–August 2025)
Date Event Source
06‑15‑2025 USTR releases Section 301 findings on Korean automotive sector USTR (2024)
06‑27‑2025 High‑Level U.S.–South Korea Trade Dialogue convened White House Press Release
07‑02‑2025 President Trump announces potential 25 % tariff on Korean cars USTR (2025)
07‑05‑2025 President Trump says “we’ll work something out with South Korea” White House (2025)
07‑12‑2025 Temporary suspension of tariff pending fact‑finding MOTIE (2025)
07‑31‑2025 Photograph: Kia vehicles at Pyeongtaek Port (REUTE, $28.90) REUTE Stock Image (2025)
08‑15‑2025 Joint IP Working Group established USTR & MOTIE (2025)