The U.S. Trade Representative (USTR) has decided to impose a minimum tariff of 12.5% on South Korean products due to deficiencies in the country's forced labor import ban. The South Korean government noted that the U.S. reaffirmed the 15% tariff cap agreed upon in the Korea-U.S. tariff agreement, which alleviates some uncertainty regarding tariffs.
According to the Ministry of Trade, Industry and Energy, the USTR announced the final results of its Section 301 investigation into the forced labor import ban on July 23 (local time). The U.S. will categorize South Korea, China, the European Union, Japan, the United Kingdom, India, and 60 other economies into four groups, applying tariffs of either 10% or 12.5% based on their forced labor import ban and existing trade agreements.
For South Korea, Japan, and Switzerland, if the existing Most-Favored-Nation (MFN) tariff is lower than 12.5%, the Section 301 tariff will be added to ensure a total tariff rate of 12.5%. Products already subject to MFN tariffs of 12.5% or higher will not incur additional Section 301 tariffs, maintaining the existing rates. As a result, South Korean products will face a minimum tariff rate of 12.5%.
However, products and components subject to Section 232 tariffs, such as automobiles, steel, and semiconductors, are excluded from this measure. Raw materials and certain specific items that could cause supply shortages or economic disruption in the U.S. are also exempt.
The new tariffs will take effect at 12:01 a.m. Eastern Time on July 24. Previously, the U.S. had imposed a temporary global tariff of 10% under Section 122 of the Trade Act after a court ruled that the reciprocal tariffs based on the International Emergency Economic Powers Act (IEEPA) were illegal. The forced labor Section 301 tariffs will be applied when the Section 122 tariffs expire.
The Ministry of Trade assessed that the recent decision does not undermine last year's Korea-U.S. tariff agreement. Minister Kim Jung-kwan and Trade Negotiations Chief Yeo Han-goo visited the U.S. this week to discuss the forced labor and overproduction Section 301 tariffs with U.S. Secretary of Commerce Howard Rutnik and USTR Representative Jamieson Greer.
South Korean officials emphasized that the combined burden of the two types of Section 301 tariffs should not exceed the agreed-upon 15% level. The U.S. also reaffirmed its commitment to adhere to existing trade agreements. The joint fact sheet from the Korea-U.S. agreement states that the U.S. will apply the higher of the Korea-U.S. Free Trade Agreement (FTA) or MFN rates and the 15% tariff on South Korean products.
Looking ahead, the South Korean government aims to limit any additional tariff burden from the ongoing structural overproduction Section 301 investigation to a maximum of 2.5 percentage points. If the total tariff rate already reaches 12.5% due to the forced labor tariff, adding an overproduction tariff exceeding 2.5 percentage points could surpass the agreed 15% threshold.
The overproduction investigation targets key South Korean manufacturing sectors, including steel, automobiles, batteries, semiconductors, chemicals, machinery, and shipbuilding. The USTR began its investigation in March involving 16 economies, including South Korea, China, the EU, and Japan, but has yet to finalize the tariff rates and targeted products.
The government believes that the finalization of the forced labor tariffs has reduced some uncertainty following the court ruling on reciprocal tariffs and the expiration of the Section 122 tariffs. However, as the overproduction investigation is still ongoing, high-level consultations and sector-specific responses will continue until the U.S. announces its final measures.
A Ministry official stated, "We clearly communicated to the U.S. that the total of the forced labor Section 301 tariffs and the overproduction Section 301 tariffs should not exceed 15%. The U.S. has reaffirmed its commitment to adhere to the existing Korea-U.S. tariff agreement, and we will work closely to maintain a balance of interests for our side."
* This article has been translated by AI.
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