What to know about US tariff ruling’s impact on Korea

United States President Donald Trump attends the National Governors Association dinner at the White House in Washington, Saturday (local time). AP-Yonhap

Questions over trade linger between Korea and the United States, as U.S. President Donald Trump is showing no signs of relenting to the Supreme Court’s ruling on Friday (local time) that his tariff hikes based on International Emergency Economic Powers Act (IEEPA) were illegal.

Condemning the court’s decision, Trump imposed a 10 percent global tariff through an executive order on Saturday, raising it to 15 percent just a day later. With the latest measure adding greater market uncertainties over the Korea-U.S. trade landscape, here are some key points that may help make sense of the volatile situation.

Which Korean export items are affected?

The ruling affects Trump’s so-called “reciprocal tariffs,” which were based on the IEEPA. Items that were levied under other legal grounds are not affected by his latest ruling.

Citing the IEEPA, the Trump administration announced blanket tariffs of 25 percent on Korea in April last year. Automobiles and auto parts were subject to a separate 25 percent tariff under a different legal basis.

In July last year, after Korea pledged $350 billion in investment in the United States, Washington agreed to lower the blanket tariff to 15 percent and reduce auto tariffs to the same level.

However, in January, citing delays in procedural steps by the Korean government in implementing the agreement, the administration threatened to raise the tariff on all Korean exports, including automobiles, back to 25 percent.

The Supreme Court ruling invalidated the blanket tariffs, but automobiles and semiconductors, which account for the largest share of Korea’s exports to the U.S., are governed under separate laws and are therefore not affected by the ruling.

Trump said in August last year that he would impose a 100 percent product-specific tariff on semiconductors, but the final rate has yet to be determined.

Tariffs on steels and aluminum will also remain the same at 50 percent, as it is also based on a separate law.

Cargo containers for exports are piled at Pyeongtaek Port in Gyeonggi Province, Sunday. Yonhap

Which clauses are supporting Trump’s tariff push?

Trump cited Section 122 of the Trade Act of 1974 as the legal basis for imposing a 15 percent global tariff after the Supreme Court ruling. It allows a president to impose a temporary tariff in the form of duties to restrict imports. Its effect, however, is limited to no more than 15 percent and no longer than 150 days. If Trump seeks to maintain the tariffs beyond that period, congressional approval would be required.

The Trump administration seeks to use Section 301 of the Trade Act, Section 232 of the Trade Expansion Act of 1962 and Section 338 of the Tariff Act of 1930 as tools to bypass the ruling.

Section 301 of the Trade Act stipulates that an action can be taken if the trade representative determines “an act, policy or practice of a foreign country” is unfair to “and burdens or restricts United States commerce.”

Section 232 of the Trade Expansion Act states that the president may impose tariffs on certain articles if they are being imported “in such quantities or under such circumstances as to threaten or impair the national security,” and is already used as legal grounds for imposing automobile, steel and other item-specific tariffs on Korean exports.

Section 338 of the Tariff Act authorizes the president to impose tariffs of up to 50 percent of a good’s value on imports from countries that unreasonably discriminate against U.S. trade through tariffs, regulations or other measures.

Can Korean companies expect restitution?

Local reports estimate that potential refund claims stemming from the decision could reach as much as $175 billion, but the U.S. Supreme Court did not specify in its ruling whether already collected tariffs would be refunded or what procedures would apply.

The Korea International Trade Association said that procedures for tariff refunds may vary depending on administrative guidelines, but companies should prepare in advance by referring to the general refund standards and procedures of U.S. Customs and Border Protection until clearer guidance is provided.

The Korean Ministry of Trade, Industry and Resources on Saturday said it will seek ways for Korean companies to get refunded for the 15 percent tariffs they had paid to the U.S. A more detailed guideline on the matter is set to be discussed on Monday.

Ongoing lawsuits seeking tariff refunds are expected to further complicate the process in the coming months.

Around 1,000 companies worldwide have already filed suits to demand tariff refunds. Among them are Korean firms such as Taihan Cable & Solution, Hankook Tire & Technology and Harman International, an American subsidiary of Samsung Electronics.