US Warns South Korea It May Raise 15% Tariff if Investment Plans Are Delayed

US Commerce Department Sends Emails Demanding Faster Investment

Frustration Mounts After 10 Months Without Project Announcement

Presidential Office Holds Emergency Meeting on Response

The US government has delivered what South Korean officials view as an ultimatum: accelerate investment in the US or risk an increase in the current 15% reciprocal tariff. South Korea’s presidential office held an emergency meeting with relevant ministries to discuss a response.

The Korea Economic Daily reported on Aug. 14 that the US Commerce Department, led by Secretary Howard Lutnick, sent repeated emails to the South Korean government this week after a similar message late last month on US investment projects and reciprocal tariffs. The emails expressed dissatisfaction that a $200 billion US investment plan pledged in the Korea-US Joint Fact Sheet, or JFS, after the October 2025 summit in Gyeongju had still not been announced 10 months later. That figure excludes $150 billion in shipbuilding cooperation.

The message also said the delay could be reported to President Donald Trump if the announcement is pushed back further, according to people familiar with the matter. South Korean officials took that as pressure that Trump could raise reciprocal tariffs. Another email with stronger language was sent earlier this week, the people said.

South Korea is currently subject to a 15% reciprocal tariff, a rate tied to carrying out $350 billion of investment in the US. US officials suspect Seoul is delaying project selection by citing “commercial reasonableness,” according to people familiar with the matter. A South Korean government official said Seoul is engaged in intense discussions with Washington over US investment and acknowledged the situation is difficult.

The presidential office convened officials from the Ministry of Trade, Industry and Energy and other agencies on Aug. 13 to discuss countermeasures. An emergency trip to the US by Trade Minister Kim Jung-kwan is also under consideration. Some officials see the pressure as a tactic by the Trump administration to produce visible economic results ahead of the US midterm elections in November.

US Says Delay Could Be Reported to Trump; Kim Jung-kwan Weighs Emergency US Trip

Japan, which concluded investment and tariff negotiations with the US in July 2025, announced its first and second investment projects in February and March this year. South Korea, which wrapped up talks with Washington three months later, has yet to announce its first US investment project.

The leading candidate is a $20 billion gas-fired combined-cycle power complex in Texas, according to people familiar with the matter. Large-scale nuclear and small modular reactor investment projects have also been discussed behind the scenes, but the two sides have yet to narrow differences over which technology model to use.

Washington is dissatisfied with the pace of South Korean investment in the US, and that frustration was reflected throughout the emails sent to Seoul, according to people familiar with the matter. The Korea-US Joint Fact Sheet says South Korea will pursue a total of $350 billion in investment by the end of Trump’s term in January 2029, including $150 billion in shipbuilding cooperation and $200 billion in strategic investment.

Although the two sides set an annual cap of $20 billion, taking exchange-rate conditions into account, the US side is asking South Korea to announce projects now even if the actual funding comes later, the people said. The US political calendar, including the November midterm elections, is also a factor.

An industry official said South Korea, unlike Japan, must complete legal procedures including enacting a special law and establishing a Korea-US Strategic Investment Corp., making delays hard to avoid. Still, from the US perspective, complaints are bound to arise if South Korea benefits from lower tariffs without carrying out the investment it promised.

Within the South Korean government, officials on the foreign policy and national security side who prioritize the Korea-US alliance are also increasingly dissatisfied with the trade and industry officials leading the talks with Washington, according to the report.

Officials say the core reason for the delay is commercial reasonableness. US officials also suspect Seoul may be invoking that principle to put off investment decisions, according to people familiar with the matter. The Korea-US Joint Fact Sheet explicitly includes the concept.

An enforcement decree under the special law on Korea-US strategic investment, drafted on the basis of that document, stipulates that the $200 billion in US investment excluding shipbuilding cooperation must be able to repay principal and interest through expected returns. That leaves the South Korean government little room to approve loss-making investments because doing so could expose officials to legal liability later.

Han Jae-young, Korea Economic Daily reporter jyhan@hankyung.com

Kim Hyung-kyu, Korea Economic Daily reporter khk@hankyung.com

Kim Dae-hoon, Korea Economic Daily reporter daepun@hankyung.com

Park Jong-gwan, Korea Economic Daily reporter pjk@hankyung.com