The U.S. Supreme Court has expressed skepticism that the Trump administration has the authority to impose its “Liberation Day” tariffs during oral arguments. The questioning raised the prospect that the Supreme Court could rule against the Trump administration. But even an adverse ruling for the president is unlikely to change Korea’s calculus regarding the recently concluded trade agreement with the United States.
The agreement reached at the Asia-Pacific Economic Cooperation summit in Gyeongju, North Gyeongsang Province, lowers U.S. tariffs on most of Korea’s exports to 15 percent and caps the cash transfer for investments in the United States at $20 billion per year. Korea has strong reasons for sticking to the deal regardless of how the Supreme Court rules.
The tariffs imposed by the Trump administration on Korea and other countries were authorized by declaring a national emergency under the International Emergency Economic Powers Act (IEEPA) based on the United States’ persistent trade deficit. In the Trump administration’s estimation, this gave it the ability to unilaterally impose tariffs of any amount. It is this authority that the Supreme Court has questioned.
One difficulty for Korea is that the IEEPA is not the only authority the Trump administration has used to impose tariffs. The administration has also initiated Section 232 national security investigations. These allow the administration to impose tariffs where the importation of goods would hinder U.S. national security — such as if a flood of steel imports undermined U.S. steel production to the extent that, in a crisis, the United States would not have sufficient production capacity.
If the Supreme Court rules against the use of IEEPA, many of the tariffs on Korean exports would revert to their rate under the U.S.-Korea Free Trade Agreement, but crucially, Korea’s main exports to the United States are largely subject to Section 232 tariffs rather than IEEPA tariffs. For example, automobile and auto parts exports account for a little less than a third of Korea’s exports to the United States and are subject to Section 232 tariffs.
In the absence of a separate deal with the Trump administration, auto tariffs would return to 25 percent, placing Korea at a disadvantage to Japan and the European Union. The Section 232 tariffs are well established in U.S. law and are not being reviewed by the Supreme Court.
The Trump administration is also expanding the range of products that are covered under Section 232. The administration has yet to finalize tariffs on semiconductors, but has agreed that Korea will not face a worse tariff rate than Taiwan. It has also announced — but has not implemented — a 100 percent tariff on pharmaceuticals, and is conducting ongoing investigations into critical minerals, polysilicon, drones and a range of other products. One path the Trump administration could take in the absence of IEEPA justification is to increase the range of products and their derivatives covered under Section 232 investigations.
It could also invoke other powers that Congress has given to the administration. The first Trump administration utilized a Section 301 investigation to examine China’s unfair trade practices related to intellectual property. While the “Liberation Day” tariffs on China over fentanyl have gained the most attention, the Section 301 tariffs on China were kept in place by the Biden administration and used to justify a 100 percent tariff on Chinese electric vehicles.
The current Trump administration is reviewing China’s compliance with the initial agreement reached during the first Trump administration — something China has not fulfilled, as noted by the Peterson Institute for International Economics. That review could be used to raise tariffs on China even in the absence of IEEPA. The Trump administration could similarly use a Section 301 investigation to justify future tariff increases on Korea.
Both Section 232 and Section 301 investigations would delay but not ultimately stop the Trump administration’s ability to put tariffs on Korea or other U.S. trade partners, but those aren’t the only reasons Korea should maintain the new deal with the Trump administration. Were Korea to seek substantial revisions, the United States could withdraw its support for the development of nuclear-powered submarines or the sale of 260,000 graphics processing units from Nvidia that are set to advance Korea’s artificial intelligence ambitions.
Ultimately, the Supreme Court’s decision will play a defining role in shaping the limits of a U.S. president’s emergency powers. A ruling against the Trump administration would constrain its ability to impose tariffs. However, since much of Korea’s trade would still be subject to tariffs — and because unraveling the deal could jeopardize other key agreements — the ruling is unlikely to alter Korea’s broader calculus regarding the trade deal.
Troy Stangarone is the director of the Hyundai Motor-Korea Foundation Center for Korean History and Public Policy and the deputy director of the Indo-Pacific Program at the Woodrow Wilson Center.