Seoul: South Korea is preparing for the implications of reciprocal tariffs announced by U.S. President Donald Trump, though experts suggest that the nation may have sidestepped the worst-case scenario due to the scale of duties compared to its trade surplus with America.
According to Yonhap News Agency, Trump's proposed tariff framework will impose a 26 percent reciprocal tariff on South Korea starting next Wednesday (U.S. time). This move is part of a broader strategy to reduce America's trade deficits with other countries and energize domestic industries. The tariffs on South Korea are notably lower or similar to those imposed on many of its regional competitors, such as China and Japan, which face rates of 34 percent and 24 percent, respectively.
Park Jung-soo, an economics professor at Sogang University, acknowledged the "considerable" impact of the new duties but highlighted South Korea's industrial competitiveness as a crucial factor in addressing the situation. "There were concerns that South Korea would be hit harder because of the scale of our trade surplus, but we appear to have avoided the worst-case scenario," he remarked to Yonhap News Agency.
South Korea's exports to the United States increased by 10.5 percent from the previous year, reaching US$127.9 billion last year, marking eight consecutive years of growth. Seoul recorded a record trade surplus of $55.7 billion for 2024, which is a 25 percent increase from the prior year.
Park advised against adopting a reactive, short-term strategy to the tariff issue and suggested that authorities concentrate on specific sectors or items in diplomatic discussions. He emphasized the importance of a forward-looking, trust-based strategy, urging the development of a long-term plan to gradually reduce the surplus and communicate it with the U.S.
Discussing the potential longevity of the tariff measures, Park noted that their duration would likely hinge on U.S. domestic politics, suggesting that sincere efforts from Seoul to balance its trade with Washington might lead to some relief.
Regarding the South Korea-U.S. Free Trade Agreement (FTA), Park predicted that renegotiation initiatives would likely originate from Washington. He also highlighted the complexity added by South Korea's unique security situation, which makes joint action with other countries unrealistic.
Chung Ji-young, an emeritus professor of trade at Chonbuk National University, described the latest measure as "the real beginning of protectionism" and urged South Korean policymakers to enhance the competitiveness of key industries. He criticized domestic business regulations for undermining trade competitiveness and suggested that South Korea should increase imports in advanced technologies to reduce the trade surplus with the U.S.
Chung also speculated that the new tariffs might not be enduring, predicting that if U.S. consumers face significantly higher prices due to the tariffs, inflationary pressures will mount and the political pressure in the U.S. will become too strong to sustain the tariffs for more than six months.