The deal, which will also see Seoul invest $350bn (£264.1bn) in the US, has been touted as a success in South Korea – especially given the record trade surplus of at least $56bn with the US last year.

Pressure on Seoul had been mounting after Japan, a key competitor in the car and manufacturing industries, secured a 15% tariff rate with the US this week.

It comes just a day before a 1 August deadline for countries to reach agreements with the US or be hit with higher tariffs. South Korea had been facing a 25% levy if it had not struck a deal.

President Donald Trump says the US will charge a 15% tariff on imports from South Korea, in what he called a “full and complete trade deal”.

The 15% tariff rate will cover both cars and semiconductors, two of Seoul’s main exports to the US.

But steel and aluminium, other big earners for South Korea, will be taxed at 50%, in line with the global rate President Trump has set.

Nevertheless, South Korean leader Lee Jae Myung has praised the deal, saying it would put his country on an equal or better footing compared with other countries.

One victory for South Korea is that it did not need to cross key red lines it had set, chiefly that it would not further open up its rice and beef markets to US imports.

Seoul has strict controls over how much US rice and what types of beef can be imported, to protect its farming industry, and farmers were planning to protest if these rules were relaxed.

Of the $350bn South Korea has promised to invest in the US, $150bn will go into helping the US build ships, including warships.

This was central to South Korea’s strategy. It has a thriving shipbuilding industry, building more vessels than any other country in the world other than China, at a time when US shipbuilding and its navy is in decline.

By helping the US in this arena, it gets to address US security concerns, while bolstering its own industry.

Much of the other investment it seems will come in the form of money South Korea had already pledged to the US during the previous Biden administration that has yet to be delivered – money to help the US manufacture cars, semiconductors, and batteries from electric vehicles.

This deal also does not touch South Korea’s military alliance with the US and the billions of dollars Washington spends to help defend the South from North Korea.

In the past, President Trump has threatened to withdraw US troops from South Korea unless it pays more for this arrangement.

It is a threat that hangs over Seoul’s head, and negotiators had contemplated trying to settle this issue alongside tariffs.

But these negotiations will now take place when President Lee visits Washington in two weeks’ time for a summit with President Trump, meaning Seoul may need to offer up another vast sum of money.

Since returning to office in January, Trump has introduced a series of import taxes on goods from other countries, and threatened many more.

He argues that these tariffs will boost American manufacturing and protect jobs.

However, his volatile international trade policy has thrown the world economy into chaos, and critics have warned that the tariffs are making products more expensive for US consumers.

Additional reporting by Jake Kwon in Seoul