Confusion arises as Trump cites 25% tariff for Korea, while White House document lists 26%
US President Donald Trump imposed 25 percent tariffs on all imports from South Korea, leaving authorities and businesses bracing for the impact on the export-dependent nation.
However, there has been confusion due to discrepancies between Trump's remarks and official documentation concerning South Korea's tariff rate. The chart Trump showed during his announcement indicated a 25 percent tariff for Seoul, but an executive order annex on the White House website listed the rate as 26 percent. South Korea's Industry Ministry said it is currently verifying the exact figure.
Trump announced a sweeping set of new tariffs on Wednesday, which he dubbed “Liberation Day.” The measures include “baseline tariffs” of 10 percent on all countries to go into effect Saturday. In addition, much higher tariffs are being slapped on countries labeled the “worst offenders,” which includes South Korea.
Around 60 countries are being hit with individual "reciprocal" tariffs set to go into effect on April 9. South Korea faces a 25 percent tariff, which is slightly higher than the 20 percent levy for the European Union and 24 percent for Japan, but lower than countries like Vietnam at 46 percent, Taiwan at 32 percent, India at 26 percent, 36 percent for Thailand and 49 percent for Cambodia.
China has been hit with one of the highest tariffs of at least 54 percent, adding the latest levy of 34 percent to a 20 percent tariff imposed earlier.
Trump described the duties as “kind,” considering trading partners' tariff and nontariff barriers, as well as other factors.
“We are being very kind,” Trump said in the Rose Garden at the White House in Washington. “We will charge them approximately half of what they are and have been charging us. … If they complain, if you want your tariff rate to be zero, then you build your product right here in America.”
A chart presented during Trump’s announcement alleged that South Korea imposes an effective 50 percent tariff on US products, when taking currency manipulation and trade barriers into account. The Trump administration stressed that the 25 percent rate is actually “discounted.”
Immediately following the announcement, South Korea's acting President Han Duck-soo convened an emergency task force meeting, instructing emergency support measures for affected businesses.
“This is a very grave situation where a global trade war has become a reality. The government must pour all its capabilities into overcoming the trade crisis,” Han said at the meeting attended by Finance Minister Choi Sang-mok, Industry Minister Ahn Duk-geun and other senior officials.
Han instructed Ahn to work closely with businesses to analyze the details and impact of the reciprocal tariffs, and actively engage in negotiations with the US to minimize damage to the country. He also urged the government to prepare emergency support measures for companies that will be affected by the tariffs, including the auto industry.
Han also said the government will immediately take steps for the trade minister to visit the US and for close consultations with the US at all levels, at an emergency meeting held again in the afternoon.
The auto industry faces added concern, as a separate 25 percent tariff on all foreign automobiles and key parts took effect Wednesday. The auto tariffs are expected to have a substantial impact on Korean carmakers Hyundai Motor and Kia, as automobiles are among South Korea's top exports to the US.
Trump’s move was widely anticipated as the US president had repeatedly pointed to Korea in recent weeks over nontariff barriers and a growing trade deficit. Trump, who is fixated on tackling the country’s widening trade imbalance, sees Korea, with which the US currently runs its eighth-largest trade deficit, at $66 billion last year, as hurting its trade.
The Office of the US Trade Representative released an extensive report on foreign trade barriers Monday, citing Seoul’s policies in automobiles, American beef, defense trade and nuclear power plants as areas of concern.
Korean companies, with business interests spanning automobiles, semiconductors and batteries, now face a major challenge in maintaining their competitiveness in the all-important American market.
The new tariffs also cast uncertainty over the US-South Korea Free Trade Agreement, which had largely eliminated tariffs between the two countries since 2012.
Analysts in Seoul have expressed disappointment that the announcement appeared to disregard the existing FTA framework.
“It seems that there was no consideration for the FTA in announcing the reciprocal tariff,” said Chung Chul, president of the Korea Economic Research Institute, at a forum on how Korea should respond to Trump’s tariffs, held on Thursday by the Federation of Korean Industries. “This raises concerns that the FTA could be nullified. We still have some leverage based on the FTA, and there may be opportunities to use that in negotiations. But for now, it appears that the US has no consideration in that regard.”
Former South Korean Trade Minister Yeo Han-koo, who is now a senior fellow at the Peterson Institute for International Economics, expressed disappointment about the unexpectedly high rate despite being an FTA partner.
“South Korea has been an FTA partner for 13 years and has made noteworthy contributions to key US industries like semiconductors, automobiles and batteries. In fact, we were recently the top greenfield investors in the US,” said Yeo.
“Despite all this, a 25 percent tariff is unexpectedly high,” he said, criticizing the lack of transparency in how the tariffs were calculated. “I am not sure if the US took into account the fact that Korea’s tariff rate on (the US) is close to zero.”
Regardless of these concerns, experts agree that a complete renegotiation of the FTA is less likely.
“I think it’s unlikely we will see formal renegotiations or revisions to the FTA in the short term,” said Lee Jae-min, professor of law at Seoul National University. “This is because many of the issues the US is now raising fall outside the scope of the existing FTA. So the chance of revisiting the FTA itself is relatively low.”
But Lee added that there will likely be a need for a new framework for cooperation that encompasses the common interests of both nations, including digital trade, semiconductor supply chains and economic security cooperation.
Yeo also floated the possibility that rather than a formal revision of the FTA, the US could pursue a lighter, faster arrangement outside the FTA framework because a complete revision would take a great deal of time.
As the possibility of talks remains open, experts called for a cautious and strategic approach to ensure Korea's interests are protected while taking Trump's perspective into account.
“This is only the beginning to the negotiations and not the end,” Yeo said. “So there is plenty of room for negotiation going forward, and among the various nontariff barriers proposed by the US, some of the demands are unreasonable, but there are also some that we need to do to improve our competitiveness and to proactively increase our opportunities.”
“If we negotiate in line with the goals of the Trump administration, we expect to achieve a favorable outcome,” said Chung. “The executive order leaves room for lowering tariffs if cooperation is needed in areas of economic security. We should make better use of the strategic value of US-Korea relations, including our investments in the US.”
sahn@heraldcorp.com
