Industry and Trade Minister Kim Jung-kwan meets with U.S. Commerce Secretary Howard Lutnick at the Mayflower Hotel in Washington, D.C., on Nov. 23 (local time). Photo courtesy of the Ministry of Trade, Industry and Energy
Yeo Han-koo (right), Trade Negotiations Minister at the Ministry of Trade, Industry and Energy, poses with U.S. Trade Representative Jamieson Greer during a meeting in Washington, D.C., on Nov. 21 (local time). Photo courtesy of the Ministry of Trade, Industry and Energy
The US government imposed forced labor tariffs of 10 to 12.5% on 60 countries, including Korea, on the 23rd local time, citing Section 301 of the Trade Act. The Korean government plans to continue negotiations with the United States to ensure that the total tariff rate, including future overproduction tariffs, does not exceed 15%. It also decided to review introducing a system to restrict imports of goods produced through forced labor.
The Office of the US Trade Representative (USTR) finalized the forced labor tariff plan that day and said it would take effect at 12:01 a.m. on the 24th. The basic framework targets imports of goods produced through forced labor, imposing a 10% tariff on countries with related prevention systems and a 12.5% tariff on countries without such systems.
Specifically, the US reclassified the 60 countries under investigation into four groups, considering whether they have systems banning imports of forced-labor products and existing trade agreements. First, three countries—Korea, Japan, and Switzerland—will face a 12.5% tariff, including the most-favored-nation (MFN) tariff rate, while two economies, the European Union (EU) and Taiwan, will face a 10% tariff. For the remaining countries, tariffs of 10 to 12.5% will be added to their existing MFN tariffs. The new tariff does not apply to products already subject to sectoral tariffs, such as automobiles, steel, and semiconductors.
Industry is relieved for now. Jang Sang-sik, head of the International Trade and Commerce Research Institute at the Korea International Trade Association, said, “While the position has become somewhat disadvantageous compared to Taiwan and the EU, the items in which Korea competes directly with the two in the US market are limited, and in particular, many key information technology (IT) products that compete with Taiwan were excluded from this measure, so the actual impact will not be significant.” He explained, “The remaining items are also at an overall manageable level.”
The problem is the overproduction tariff that will follow. The USTR is also conducting an investigation to impose overproduction tariffs on 16 countries, including Korea. If this tariff exceeds 2.5%, the total tariff rate would surpass the 15% ceiling previously agreed upon by the two countries. Accordingly, the government is known to have reviewed a plan to revise the Foreign Trade Act to institutionalize a ban on imports of forced-labor products. It has left open the possibility of establishing such a system, depending on room for further negotiations with the US and the direction of talks.
In addition, the government plans to negotiate with the US so that the total tariff rate does not exceed 15%. An official at the Ministry of Trade, Industry and Energy stressed, “The US side reaffirmed its position that the existing trade agreement must be observed.” A Presidential Office official also said, “We will continue close consultations with the US side to ensure that the 15% tariff rate ultimately agreed upon by the two countries is upheld.”