South Korea’s parliament has passed crucial legislation enabling a $350 billion investment pact with the United States, a move designed to secure reduced tariffs amid escalating global trade tensions. The bill, approved overwhelmingly on Thursday, formalises a November agreement in which Seoul committed to massive investments in exchange for lowered US import duties on Korean goods.
The bilateral deal, negotiated to mitigate the impact of former President Donald Trump’s 25 per cent blanket tariffs, promised South Korea’s pledge of $150 billion for shipbuilding cooperation and the remainder for strategic sectors including semiconductors. In return, the US agreed to slash the tariff rate on Korean exports to 15 per cent. However, Trump publicly threatened in January to revert to the 25 per cent rate, accusing the South Korean parliament of delaying the necessary investment legislation. His criticism accelerated the bill’s placement for a vote.
The legislation passed decisively with 226 votes in favour, supported by both the ruling Democratic Party and the main opposition People Power Party, against only eight dissenting votes. President Lee Jae Myung thanked lawmakers, stating the bill establishes the “institutional and legal foundation” to implement the agreement, framing it as essential for the nation’s economy and security.
The vote occurs against a backdrop of renewed US trade scrutiny. Just one day prior, Washington launched new investigations into alleged unfair trade practices by several countries, including South Korea, which could lead to further punitive duties. Separately, the US Supreme Court recently invalidated Trump’s global tariff authority, ruling he had overstepped emergency economic powers. In response, Trump has shifted to a different legal mechanism to impose a new 10 per cent national duty, with plans to raise it to 15 per cent, while sector-specific tariffs on steel, aluminium, and autos remain in place.
A spokesperson for President Lee’s office indicated Seoul will now work to ensure it is not “disadvantaged compared with other major countries” following the US probe announcement. The swift parliamentary approval underscores South Korea’s prioritisation of stabilising its most critical economic relationship. The enacted bill is a key step in locking in the agreed tariff reduction and the substantial US-bound investment, providing a measure of predictability for Korean exporters and industries despite the volatile international trade environment. The government is now expected to focus on the formal implementation of the investment framework while navigating the separate US investigations.
