How U.S.–Korea Tariffs Hit Us: A Story of Disruption & Reboot
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Introduction
In March 2025, our business shut its doors temporarily. It was not by choice, but by shock: sudden changes in tariffs between the U.S. and Korea disrupted supply, sales, and cash flow. We weren’t alone — many companies have faced similar uncertainty. What follows is our experience, the macroeconomic context, and what we believe businesses should do going forward.
What Changed: U.S.–Korea Tariff Landscape in 2025
- In April 2025, the U.S. introduced broad “reciprocal tariff” actions under several statutes (including IEEPA and Section 232) affecting many imports from South Korea. Key sectors targeted included automobiles & auto parts, steel, aluminum.
- Although South Korea is part of the KORUS Free Trade Agreement, these new tariffs represent a divergence from the old regime: zero or low tariffs for many goods. The deal reached in July 2025 negotiated a reduced tariff rate of 15% on many items that had been facing higher threats.
- According to the latest data, Korean exports to the U.S. fell sharply for certain product categories once the higher tariffs kicked in. For example, Reuters reported that in August 2025, U.S.-bound shipments dropped significantly in automotive, machinery, steel. (Fact) Reuters
- The Bank of Korea (BOK) estimates that these tariff changes will reduce economic growth by roughly 0.45 percentage points in 2025 and 0.60 percentage points in 2026 relative to what was expected before the tariffs. (Fact) Reuters
How It Affected Us: Our Specific Challenges
Being in business in this climate from March 2025 was especially difficult. Here are what we saw:
| Challenge | Effect on Our Business |
|---|---|
| Increased Import Costs | Raw materials / components we sourced from the U.S. (or which passed through U.S. supply chains) saw import duty increases. This squeezed margins heavily. |
| Price Competitiveness | Products exported (or sold via cross-border channels) faced higher tariffs, making them more expensive in U.S. markets. We lost customers who looked elsewhere or delayed purchases. |
| Supply Chain Disruption | Tariff uncertainty led some suppliers to raise prices, delay shipments, or demand prepayments. Some component lines became temporarily unavailable or more costly, causing delays. |
| Cash Flow Stress | Because sales dropped & costs rose, cash flow tightened. We had to pause operations in March, and reopening required renegotiation with suppliers, re-adjusting prices, seeking new markets. |
| Planning Paralysis | Long lead-times, inventory risks, and uncertainty about further tariffs made us hesitant to make investments in growth (staff, marketing, capacity). |
What Government Measures / Deals Did (and Didn’t) Do
- The July 2025 U.S.–Korea deal reduced some of the threat: instead of a flat 25% reciprocal tariff, some items were capped or agreed at 15%. For automotives and auto parts, in particular, this was a partial win. (Fact) CSIS+1
- For exporters, especially smaller ones, the deal provided some relief but many product lines were still exposed. The time lag in implementation, legal uncertainties, and lack of clarity on which products are exempt made planning hard. (Interpretation / Inference, with strong evidence)
- The Korean government has announced support measures: subsidies, aid for semiconductors, auto sector support, export diversification efforts. (Fact) AP News+1
Why We Remained Closed / Delay in Reopening
Putting together our internal analysis, these factors forced our temporary closure:
- Margin compression: Anticipated price increases from tariffs made our cost of goods unsustainable unless we raised our own prices — but raising price risked losing customers.
- Inventory risk: Buying ahead for stock was risky under uncertainty (what if tariffs go higher? what if next removing of exemptions?)
- Demand drop: U.S. demand for our products contracted because buyers faced higher import costs or shifted to cheaper local alternatives.
- Cash reserve limitation: Without sufficient reserves, covering higher tariffs + inventory + operations + wages was too risky.
Reopening — What We’ve Done & What We Plan
Since mid-2025, we've taken steps to adjust and stabilize our operations:
- Revised product lines: Shift away from high-tariff vulnerable items; increased focus on products that are either exempt or lightly tariffed.
- Sourcing diversification: Looking for suppliers from countries with more favorable trade terms, or buying components upstream (closer to source) to avoid crossing tariffed borders.
- Price adjustments: Incremental price increases where market allows; negotiating with distributors/suppliers to share burden.
- Export market diversification: Redirecting some sales to markets outside the U.S. (Southeast Asia, Europe) to reduce dependency.
- Government aid programs: Applied for export assistance, subsidies, tax relief where possible.
Lessons Learned: What Other Businesses Should Do
If we were to recommend a playbook (so others can avoid months of closure), here are our learned lessons:
- Monitor trade policy constantly — tariffs, trade agreements, negotiations. What’s proposed today may be law tomorrow.
- Stress-test pricing & margins — build models assuming +10%, +25% tariff rates on inputs/export items. Know your break-even.
- Maintain supplier & customer flexibility — diversify supplier base; keep contracts with built-in clauses to adjust for trade cost shocks.
- Build cash buffer — be ready for periods when costs rise before revenue responds.
- Lobby / Participate — work through trade associations, government export councils to get early information, request exemptions, push for favorable trade negotiation outcomes.
Where Things Stand Now & What to Watch
- As of August 2025, the 15% tariff rates are in effect for many goods (autos, imports) in U.S.-Korea trade. (Fact) Reuters+3의회.gov+3CSIS+3
- Bank of Korea projects economic growth will be significantly lower due to tariffs. (Fact) Reuters
- Policy watchers are watching possible additional tariffs on semiconductors, pharmaceuticals, critical minerals. If those sectors hit, the ripple effect could hit many downstream businesses. (Inference, somewhat speculative but based on government signals)
Conclusion & Message to Stakeholders
To our customers, partners, and supporters: we were forced into a temporary closure not because of poor operations, but because trade policy shocks disrupted the landscape. We are reopening (or planning to reopen) with sharper leanings: more resilient supply chains, product lines adjusted for the new norm, and tighter cost controls.
To governments and trade policy makers: urgent clarity, stable tariff rules, and support mechanisms are not just nice — they’re vital for business continuity and trust. Sudden tariff jumps can shutter businesses, cost jobs, and erode investment.
We believe in surviving and growing. The world is shifting. So are we.