Washington: U.S. President Donald Trump's administration has initiated "reciprocal" tariffs, including a 15 percent levy on South Korea, with expectations of significant impacts on global trade dynamics. The tariffs, effective from 12:01 a.m. (Washington time), follow negotiations with various trading partners to reduce tariffs on exports and maintain access to U.S. markets in exchange for investment commitments.
According to Yonhap News Agency, Trump signed an executive order last Thursday to introduce reciprocal tariff rates ranging from 10 to 41 percent for around 70 trading partners. These measures aim to address trade barriers against U.S. goods, promoting "fair" and "reciprocal" trade. Despite these agreements, trade tensions with the U.S. remain, as the administration plans sector-specific tariffs on semiconductors and pharmaceuticals, impacting export-dependent economies like South Korea.
Trump's strategy uses tariffs as a tool to generate federal revenue, reduce trade deficits, and support domestic manufacturing, despite concerns over potential price hikes and economic slowdown. Wendy Cutler from the Asia Society Policy Institute commented that these actions challenge the post-World War II international trade rules, raising questions about the future of global trade without U.S. leadership.
Tom Ramage of the Korea Economic Institute of America noted that the tariffs could create divisions between countries with U.S. trade agreements and those without, potentially shifting alliances towards other trade blocs like BRICS. The tariffs, initially announced on April 2 as "Liberation Day," have undergone several delays, finally taking effect recently.
The international trade system, built on rules established by agreements like the General Agreement on Tariffs and Trade (1948) and the World Trade Organization (1994), is threatened by these new levies. The reciprocal tariffs particularly concern South Korea, which heavily relies on U.S. markets for exports. Seoul recently secured a deal with the U.S., reducing reciprocal and auto tariffs to 15 percent in exchange for significant investment and energy purchase commitments.
Despite not affecting Korea's free trade agreement status, Seoul managed to protect its rice and beef markets, crucial sectors politically. The agreement also addresses South Korea's automotive industry concerns, with reduced tariffs benefiting its significant export market in the U.S. As reciprocal tariff tensions ease, new sector-specific tariffs are anticipated, particularly affecting semiconductors and pharmaceuticals.
Trump, in a CNBC interview, hinted at impending sector-specific tariffs, suggesting initial "small" tariffs on pharmaceutical imports, escalating significantly over time. These tariffs are invoked under Section 232 of the Trade Expansion Act of 1962, allowing tariff adjustments when imports threaten national security.