On 4th (local time), President Donald Trump claimed that "the average tariff in South Korea is four times higher than in the United States," prompting the government to rebut that "the effective tariff rate on imports from the U.S. is 0.79% based on last year's data and is completely false." The government plans to correct the facts through practical working groups and visits by the head of trade negotiations to the U.S. So, where did Trump's claim come from?
According to the government on the 5th, Trump's claim appears to be based on the Most Favored Nation (MFN) tariff rates applied by the World Trade Organization (WTO). South Korea's MFN tariff rate is about 13.4%, which is approximately four times higher than the MFN tariff rate of the United States (3.3%).
The Most Favored Nation means that when a country enters into a new treaty or renews one with a specific country, it must grant that country the best treatment it has given to other countries thus far, according to international trade norms. Each country applies the same tariff rates to all WTO member countries.
The reason Trump's claim is wrong is that South Korea and the United States do not apply MFN tariff rates to each other. South Korea applies FTA tariff rates lower than the MFN rates for goods imported from countries with which it has free trade agreements (FTA). South Korea and the United States signed an FTA in May 2007. The FTA came into effect in March 2012 and underwent a revision in 2019.
Currently, the average tariff rate on U.S. imports to South Korea is 0.79%. Considering tariff refunds, this rate is even lower. Tariff rates on manufactured goods imported from the United States under the KORUS FTA are around 0%. Currently, South Korea applies duty-free status to 99.7% of over 12,000 items imported from the United States, with plans to increase that to 99.8% by 2031.
A government official noted, "Trump's claim is understood to be based on the MFN tariff rate," adding that it is "a claim that is completely different from the facts." The official stated that there are plans to rectify this fact through the Korea-U.S. working group and the head of the trade department's visit to the U.S.
This is not the first time that South Korea has been included in Trump's tariff action forecasts. Last month, Trump said on the 15th, "I will consider countries that use a value-added tax (VAT) system as countries that impose tariffs on the United States." He declared that by April 1, he would assess non-tariff barriers centered on each country's VAT and would start imposing mutual tariffs from April 2.
Value-added taxes are levied in over 170 countries worldwide, applying a uniform tax rate to both domestic and imported goods. In contrast, the United States has no VAT, and only the final consumer pays sales taxes. South Korea's VAT rate is 10%, with the possibility that the U.S. may impose a 10% tariff. South Korea's VAT rate is known to be lower than that of other countries, including European nations (20%).
Trade experts are watching the likelihood that the United States could turn South Korea's non-tariff barriers into tariffs. Park Tae-ho, director of the law firm Kim & Chang’s International Trade Research Institute, said, "There is a high possibility that taxes or regulations, non-tariff measures assessed after goods cross borders, will be turned into tariffs," adding, "When the U.S. Trade Representative (USTR) releases the '2025 Country-specific Trade Barrier Report' at the end of this month, Trump's tariff policies are likely to pour out based on this content."
Our government plans to rectify the facts starting as early as next week through the Director General-level working group with the United States. The Ministry of Trade, Industry and Energy will initiate discussions with the U.S. Department of Commerce, the U.S. Trade Representative (USTR), and the Energy Commission on tariffs, non-tariffs, shipbuilding, energy, and the Alaska project, deciding to regularly discuss various agenda items through in-person and videoconferences. Jeong In-kyu, head of the Ministry of Trade, Industry and Energy's trade negotiation office, is expected to convey South Korea's position during his visit to the U.S. next week.
Experts believe that now is the time for South Korea to consolidate the cards it can offer to the United States, including shipbuilding cooperation, expanding energy imports, and increasing defense costs. Park Tae-ho, director of the research institute, said, "If we respond one by one, we will be at a disadvantage, so we need to create a package that allows us to exchange several things at once with the United States," adding, "The Ministry must negotiate as a package at the national level through the working groups."
Former Minister of Foreign Affairs Choi Suk-young said, "Since South Korea is not Trump's primary target, there is no need for South Korea to propose something before the United States makes a request," and added, "We should prepare negotiation cards while monitoring the situation and wait until the United States makes a request."