U.S. President Donald Trump officially announced on the 13th (local time) that he has decided to impose 'reciprocal tariffs' on various countries. Reciprocal tariffs refer to the imposition of tariffs by the U.S. on foreign goods at the same rate that the foreign country applies to U.S. goods.
Korea, which has a free trade agreement (FTA) with the U.S., is expected to be less affected if only reciprocal tariffs are applied. However, with the Trump administration indicating that it will look into non-tariff barriers limiting imports as well, concerns are growing over potential discussions surrounding the import of agricultural products and platform regulations.
◇U.S. goods have an average tariff rate of less than 1%… tariffs on manufactured goods are '0'
According to the government on the 14th, reciprocal tariffs generally mean adjusting tariffs on one's own goods to match those imposed by the other country. For example, the U.S. currently imposes a 2.5% tariff on European cars, while Europe imposes a 10% tariff on U.S. cars. In this case, the Trump administration's intention is to raise tariffs on European cars to 10% to correct the asymmetrical tariff structure.
Since signing the FTA, Korea has mostly eliminated tariffs on products imported from the U.S. The tariff rate on manufactured goods such as semiconductors and automobiles is 0% for both sides.
The areas where tariffs remain are limited to certain agricultural products.
Korea imposes tariffs of 1.2% to 2.6% on U.S. beef, while the U.S. imposes a 3.5% tariff on Korean beef. Tariffs on U.S. beef are expected to be eliminated starting next year.
For dairy products, a tariff of 1.8% to 2.7% is imposed when we import U.S. products, while the U.S. imposes a specific tax of 11.5 to 30.2 cents per kg when they import Korean products.
Vegetables and fruits incur tariffs of 1.8% to 9.5% when importing U.S. products. There are no tariffs when exporting our agricultural products to the U.S. Conversely, while there are no tariffs on U.S. products imported into Korea, a tariff of 25% applies when exporting Korean products to the U.S.
The Ministry of Strategy and Finance noted, "The Korea-U.S. FTA took effect in March 2012, and the average tariff rate on imports from the U.S. is currently around 0.79% based on last year," adding, "According to the annual concession plan, tariff rates are expected to decrease further this year."
The government assessed that the likelihood of a significant increase in U.S. tariffs on Korean products due to reciprocal tariff measures is low, given that the tariff levels are already very low across the board.
◇Resolving agricultural quarantine and platform regulations in negotiations with the U.S.
The key issue is non-tariff barriers. President Trump signed a memorandum in the Oval Office that included the decision to impose reciprocal tariffs, directing nominee Howard Lutnick to review non-tariff barriers alongside the tariffs of the counterpart country.
The Trump administration defines non-tariff policies as including all measures and policies imposed by the government that restrict imports, such as import policies, sanitary measures, technical barriers to trade, government procurement, export subsidies, a lack of intellectual property protection, digital trade barriers, and anti-competitive practices of state-owned or private corporations that are tolerated by the government.
President Trump also asked for an examination of currency policy and wage suppression practices that unfairly restrict market access for U.S. corporations. The Office of the United States Trade Representative (USTR) identified automotive exhaust parts (ERC) certification regulations and the random verification process for imported vehicles by the Environmental Protection Agency as trade barriers in last year's trade barrier report (NTE).
Additionally, measures restricting agricultural imports, such as the approval process for genetically modified organisms (GMO), age restrictions (under 30 months) on imported beef, and delays in agricultural export quarantines were also mentioned. The USTR pointed out that foreign content suppliers paying network usage fees to Korean Internet Service Providers (ISPs) is also considered an 'anti-competitive system.'
Lutnick, the nominee, stated regarding reciprocal tariffs, "They will be dealt with on a country-by-country basis," noting that "The administration's research on this issue will be completed by April 1," implying that groundwork for policy implementation would be finalized by March.
A government official noted, "We do not expect any immediate direct impacts from the reciprocal tariff measures announced by President Trump," but added, "Regarding issues mentioned as non-tariff barriers, we will seek countermeasures while confirming mutual positions."