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U.S. Finalizes Tariff Rollback for Korean Autos; Seoul Shares Rally on Regulatory Clarity

U.S. agrees to a new trade deal with "South Korea" before 2027?
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SEOUL/WASHINGTON — The U.S. Commerce Department has formally executed the terms of a new bilateral trade framework with South Korea, publishing a notice in the Federal Register on Thursday that legally finalizes tariff reductions for Korean automakers. The publication marks the binding implementation of the pact reached in late October, removing lingering regulatory risk and triggering a relief rally across the South Korean auto sector.

While a tentative agreement was struck last month, market participants had remained cautious regarding the execution timeline. That caution dissipated this week after U.S. Commerce Secretary Howard Lutnick confirmed the administration's commitment on Tuesday, followed by Thursday’s Federal Register notice. The filing legally lowers the import tariff rate on South Korean vehicles from a punitive 25% to 15%, retroactive to November 1, 2025, aligning South Korea’s trade status with rates recently negotiated for Japan and Taiwan.

The codification validates the reciprocal framework negotiated throughout 2025. In exchange for tariff relief, South Korea has committed to a $350 billion investment package in the United States, with capital allocated to strategic industries including shipbuilding. The deal structures these investments in annual cash installments to mitigate financial risk for Korean conglomerates.

Market reaction to the legal ratification was immediate. Hyundai Motor Co. shares surged 6.5% to KRW 302,000, leading a four-session winning streak. The rally extended to affiliate Kia Corp and parts supplier Hyundai Mobis as investors re-priced the sector based on the stabilized regulatory environment.

Analysts project that the tariff rollback—down from the 25% baseline imposed earlier this year—will fundamentally alter the margin structure for Korean OEMs in the U.S. market. The reduction is expected to cut annual operating losses for the automakers by approximately 3 to 4 trillion won ($2.1–$2.8 billion), providing an immediate boost to fourth-quarter earnings forecasts.

Prior to this agreement, the higher tariff regime had severely impacted profitability, contributing to third-quarter operating profit drops of 29% for Hyundai and 49% for Kia. With the Federal Register notice now serving as the binding legal mechanism for the new terms, focus shifts to the execution of the mandated investment pledges.