U.S. President Donald Trump has hinted at mutual tariff measures to be announced on 2nd next month, amid growing pressure regarding non-tariff barriers in the United States. The U.S. is expected to announce targeted tariffs considering all non-tariff barriers, such as quarantine and subsidies, based on the National Trade Estimate (NTE) report by the Office of the U.S. Trade Representative (USTR).
According to the government on the 29th, U.S. Secretary of Commerce Howard Lutnick told Minister of Trade, Industry and Energy Ahn Duk-geun on the 21st that "U.S. products are struggling with Korea's non-tariff barriers," adding, "I hope there will be no situations where U.S. products are sold less in Korea due to Korea's non-tariff measures." USTR representative Jamison Greer also noted that many U.S. corporations have expressed complaints regarding unfair trade practices.
Ahead of Trump's tariff announcement, the government is reviewing the points that have been repeatedly highlighted in the country-specific trade barrier reports, while paying attention to the upcoming NTE report from the USTR. USTR has received opinions from 756 corporations and organizations this year and plans to release the country-specific NTE report by the end of this month.
The trade industry and government expect that the U.S. will point out Korea's sanitary and phytosanitary (SPS) measures as major non-tariff barriers again this time. Previously, the American Biotechnology Industry Association pointed out on the 11th that "the assessment regulated by Korea's Law on Genetically Modified Organisms (LMO) is decentralized among various agencies, resulting in a lack of transparency and predictability," noting that "this has not been resolved for over a decade." The U.S. Soybean Association also raised concerns that "Korea's approval process is excessively complicated." Recently, when the Rural Development Administration issued an 'import suitability' judgment for 'U.S. LMO edible potatoes' after seven years, it was analyzed as 'a gift for Minister Ahn during his visit to the U.S.'
There is also a high possibility that the U.S. will exert pressure on fruit imports, including apples and pears. Since 2018, USTR has been demanding the opening of Korea's apple and pear markets through the NTE each year. While tariffs on most U.S. apples and pears, excluding Fuji apples and Tongyang pears, were abolished under the Korea-U.S. Free Trade Agreement (FTA), practical imports have not occurred due to quarantine issues. Other countries must pass an 8-step Import Risk Analysis (IRA) to export apples, pears, peaches, and watermelons, which they have failed to do. The U.S. requested IRAs for apples and pears from the Korean government in 1993 and 1994, respectively, but they remain stuck at step 3.
There is also a possibility of pressure regarding the U.S. beef age restriction that USTR has continuously called for lifting. The National Cattlemen's Beef Association (NCBA) noted on the 11th that "China, Japan, and Taiwan have recognized the safety and quality of U.S. beef and lifted the 30-month restriction," demanding, "Korea should take similar measures."
◇ Service and investment equity restrictions are included
The U.S. has also pointed out barriers in the legal market and finance/insurance services. The previous year's country-specific trade barrier report highlighted that "while the foreign law firm cooperation law allowing foreign law firms was passed in 2016, Korea limits foreign law firm ownership equity to 49% and imposes restrictions on their scope of work." It also flagged the limitation of foreign investment equity in broadcasting, telecommunications, agriculture, meat distribution, energy generation, media, and transportation services.
The U.S. has repeatedly mentioned the regulation that "financial institutions must use Korean servers when utilizing cloud services" as a trade barrier. This regulation is said to hinder the entry of U.S. cloud service providers into the Korean market. Additionally, it has pointed out that public procurement IT equipment has encryption certification that differs from global standards, making it difficult for U.S. companies to enter the Korean market.
The U.S. has characterized foreign government policies that burden big tech companies as anti-competitive measures and expressed its intention to conduct thorough investigations. This includes Korea’s prohibition on the export of map data, imposition of network usage fees, and the promotion of laws fostering competition in online platforms. Last month, Trump signed an agreement to respond to unfair penalties and fines against U.S. innovative corporations.
Heo Yoon, a professor at the Graduate School of International Studies at Sogang University (Chairman of the Korean Association of International Trade), stated, "Since Korea has not increased its non-tariff barriers, I believe there will be no significant additions this year," while also noting, "President Trump is very interested in the services of big tech corporations, so there might be an emphasis on this."
Some experts believe that the value-added tax may be included in the NTE report and the basis for Trump's tariff measures. Han Joo-hee, a researcher at the Korea International Trade Association, mentioned, "Under the Biden administration, the meaning of trade barriers was minimized, and many parts were deleted," adding, "As Trump returns to power, the contents deleted from the NTE report may be restored, and information regarding the value-added tax emphasized by President Trump could be added."
Meanwhile, trade experts believe that even if President Trump announces targeted tariffs on the 2nd of next month, he will allow time for negotiations and keep options open. Professor Heo Yoon stated, "It would be quite difficult for the 200 USTR staff to tariff non-tariff barriers from hundreds of countries," and added, "President Trump will announce the tariff rates by country and industry first, and then negotiate based on reactions from each country to maximize U.S. interests."
Choi Seok-young, a senior advisor at Lee & Ko (former Ambassador for Economic Affairs at the Ministry of Foreign Affairs), stated, "I believe President Trump is likely to tariff non-tariff barriers due to his significant interest, but the U.S. will strategically allow negotiation periods to encourage counterpart countries to dismantle non-tariff barriers themselves."