President Donald Trump’s latest proposed tariff hike on South Korea comes at a particularly fraught moment for U.S.-Korea relations given that Seoul has carried out a whole-of-government campaign against a prominent U.S.-based online retailer in recent months while at the same time pursuing closer ties with China.

President Trump said Monday afternoon he will raise tariffs on certain South Korean goods to 25 percent because Korea’s legislature has not passed the trade deal U.S. and Korean negotiators reached over the summer.

“Because the Korean Legislature hasn’t enacted our Historic Trade Agreement, which is their prerogative, I am hereby increasing South Korean TARIFFS on Autos, Lumber, Pharma, and all other Reciprocal TARIFFS, from 15% to 25%. Thank you for your attention to this matter!” Trump posted on Truth Social on Monday.

Korean legislators are scrambling to pass legislation in response to Trump’s tariff threat that would create a state-run entity to manage the $350 billion Korea pledged to invest in the U.S. as part of the trade deal.

Meanwhile, the Korean government's ongoing campaign against Coupang — a Fortune 150 company based in Seattle that operates an eCommerce platform primarily in South Korea — appears to violate a section of the trade deal that requires the Seoul to treat American companies fairly.

“The United States and the ROK commit to ensure that U.S. companies are not discriminated against and do not face unnecessary barriers in terms of laws and policies concerning digital services, including network usage fees and online platform regulations, and to facilitate cross-border transfer of data, including for location, reinsurance, and personal data,” reads a White House fact sheet on the trade deal.

Like Amazon, Coupang quickly delivers products to Korean customers and is single-handedly responsible for billions of U.S. exports to Korea annually. Korea’s fight against the company began in late November when Coupang experienced an enormous data breach. Korea’s progressive government responded by launching a multi-agency push targeting Coupang and its executives, leading to heightened tensions with the Trump administration and lawmakers on Capitol Hill.

“The Coupang data breach is being treated entirely differently from data breaches that are arguably more serious by South Korean companies,” said Nicholas Eberstadt, an economist at the American Enterprise Institute and an expert on Korea.

“ It’s being treated as an excuse, not as a remedy.”

Senior Korean officials including leftist President Lee Jae-Myung have made known their intention to impose severe consequences on Coupang following the data breach, which was perpetrated by a former employee who stole an authentication key to access company systems. The breach compromised 33,000 customer accounts and data from 3,000 of those accounts was actually stored by the ex-employee.

The data was not disseminated and no fraudulent transactions happened. But it provoked an escalatory spiral of political outrage in Korea, with public officials grandstanding against Coupang as it saw an initial loss of approximately 2 million daily users.

To that end, 14 Korean agencies have opened investigations or enforcement actions against Coupang in sectors such as financial services, telecommunications, and labor.

Korean progressives in particular are keen to target Coupang due to alleged labor violations such as overworking employees and maintaining unsafe conditions. The data breach gave them an opportunity.

“Coupang initially kind of fumbled and from what I understand, it’s Coupang not understanding the political process in Korea. When you create a vacuum like that, then you open the Pandora’s box for individuals to take the initiative. And that’s what happened initially with the political leaders, and then followed by the ministry officials, as the political leaders kind of set the parameter. And the parameter was really far-fetched,” said Jae Ku, a U.S.-Korea relations expert and a senior fellow at the Center for the National Interest, a foreign policy think tank.

The Korean government’s regulatory response has gone well beyond reforms focused on preventing future data breaches, to the point where public officials have threatened to revoke the company’s business license and put it out of business entirely. It is a dramatic response, even for a nation where the state plays a very active role in economic affairs and has seen its fair share of high-profile corruption scandals.

“This is not, historically speaking, a free market economy. It’s an economy with an enormous prerogative for government planning and government intervention,” Eberstadt said.

“ When you have such power and prerogatives, of course they can be misused.”

Additionally, Korean authorities have pursued criminal charges against Coupang executives, who are U.S. citizens, for perjury and obstruction related to the data breach. Nonetheless, Coupang remains committed to conducting business in Korea for the foreseeable future.

“While the circumstances we are facing are difficult, I want you to know that we are approaching this thoughtfully and together. Throughout all of this, our focus remains on supporting one another and continuing to deliver for our customers,” HL Rogers, interim CEO of Coupang’s Korean subsidiary, told employees in a recent internal memo.

“Please know that the leadership team is working nonstop to resolve all of these issues. We will improve our processes, learn from these issues, and continue providing great services to our customers.”

Last week, Silicon Valley investment firms Greenoaks and Altimeter filed arbitration claims against the Korean government for what they consider a sustained, targeted campaign against Coupang, a campaign they claim is motivated by a desire to benefit domestic and Chinese firms. The investors are also asking U.S. Trade Representative Jamieson Greer to launch an investigation into the Korean government’s practices.

Greenoaks holds over $1 billion in Coupang stock and Altimeter possesses $210 million in stock. The U.S.-based investors are alleging the Korean government waged a years-long pattern of selective enforcement against Coupang as it gained market share from Korean and Chinese competitors. Furthermore, they are accusing Korean officials of defamatory statements about the data breach and using the data breach to launch a disproportionate harassment campaign against Coupang.

Outrage about the Coupang scandal has reached Capitol Hill and prompted multiple committee hearings. Earlier this month, the House Ways and Means Committee’s trade subcommittee held a hearing where bipartisan outrage was directed explicitly at Korea because of the Coupang situation. Several Republican lawmakers have recently expressed concerns about Korea's targeting of Coupang, including Representatives Darrell Issa (R., Calif.) and Scott Fitzgerald (R., Wisc.).

“I am appalled at the recent actions by the Korean government to call for criminal charges against American executives of @Coupang based on a politically motivated witch hunt. The United States government will continue to pursue measures to hold the Korean government accountable for their disturbing treatment of American companies,” Fitzgerald wrote on social media.

Issa said he met with Korea’s trade minister and told him it is unacceptable to mistreat Coupang and other American companies given the longstanding alliance between the U.S. and Korea. More than 20,000 U.S. troops continue to be stationed in Korea, a close military ally and an important strategic partner to the U.S. in southeast Asia.

Meanwhile, the Korean government has pursued friendly relations with China, the world’s second largest economy and the most powerful military force in its part of the world. Lee became the first Korean leader to visit Beijing since 2019 when he met Chinese ruler Xi Jinping this month to begin a “new phase” of South Korea-China relations. Lee said the visit provided an opportunity for the “full-scale restoration of South Korea-China relations” after his impeached predecessor took a hostile approach to China.

It is not unusual for a left-wing government in South Korea to harbor some anti-American sentiments and take a pro-China outlook. However, Lee’s approach to Washington has not been hostile, as Korea promised the Trump administration it would invest $350 million into the U.S.

“While some of President Lee's cabinet retains that core of anti-American sentiments, his foreign affairs team and his economic team have stressed the importance of U.S.-ROK alliance. Hence, I applauded his decision to make his first foreign trip to D.C. and the commitment to make a strategic investment of $350 billion,” Ku said.

“At this time, I do not see ROK's pendulum swinging excessively toward the Chinese, and I think that is because the young people [20s and 30s] tend to be more pro-America than their parents.”

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