As part of its annual release, the U.S. Trade Representative's (USTR) report on foreign trade barriers was published on March 31 (U.S. time). However, this year is different. U.S. President Donald Trump, who has prioritized tariffs — calling it the "the most beautiful word in the dictionary" — will soon announce reciprocal tariffs on April 2 as part of his "America First" policy. Forecast to affect all nations, an early look at what reciprocal tariffs will look like for certain nations and their respective sectors was broadly touched upon in the USTR’s National Trade Estimate Report on foreign trade barriers.
Korea was listed among approximately 60 countries in the 2025 USTR report, alongside China, India and Japan, as well as the European Union. The reciprocal tariffs are expected to cause major disruptions, as they address both trade and nontrade barriers. A new mention in this year's report is Korea's "offset" defense trade policy. This program requires foreign defense contractors to meet certain conditions when cooperating with Seoul in the defense industry. The report suggests that this policy is unfair, as it prioritizes local technology and products over foreign ones. "An offset obligation may arise for a foreign contractor should the value of the defense contract exceed $10 million," the report said.
The report also notes import restrictions on U.S. beef based on age, as well as Korea's emissions-related component regulations, bills requiring network usage fees from foreign content providers to Korean internet service providers and Korea's regulation on dominant digital service platforms, among others. This litany of barrier items may be part of annual emunerations. However, with April 2 dubbed by the U.S. president as "Liberation Day" for the U.S. economy, Korea is unlikely to escape harm, especially with cars and semiconductors as its main exports.
Barely more than two months into his second term, Trump has imposed 20 percent tariffs on imports from China, levied global 25 percent tariffs on steel and aluminum and applied 25 percent tariffs on cars imported into the U.S. He has flip-flopped on the 25 percent tariffs on goods from Canada and Mexico — currently delayed. The details of the April 2 reciprocal tariffs are unclear, with only Trump likely knowing the specifics down to the fine print. This uncertainty regarding the tariffs and their schedule does not bode well for global economic growth or trade.
To date, Korea is dealing with the 25 percent tariffs on steel and aluminum, which have been in place since March 12, and the 25 percent tariff on cars, set to go into effect on April 2. Add to that the reciprocal tariffs, and it won't exactly be a smooth ride for Korea. White House trade adviser Peter Navarro said in an interview with Fox News in late March that "South Korea, Germany and Japan are turning the U.S. from a manufacturing nation into an assembly nation."
But it remains unclear how rewarding these bullish tariff policies will be for the U.S. economy, especially as its trade partners' economies shift toward a downward trajectory and U.S. consumers face higher prices for goods. Denial of stagflation and refusal to forecast a recession won't solve real-world financial issues. International Monetary Fund Managing Director Kristalina Georgieva told Reuters that while the IMF does not see a recession coming in the near term, "The longer the uncertainty persists about Trump's approach to tariff policy, the greater the risk to the outlook."
It is with a bit of luck that Korea's trade expert, acting President and Prime Minister Han Duck-soo, has taken action, pledging that both the public and private sectors will work together to alleviate the impact of the Trump tariffs.
The main opposition Democratic Party of Korea should withdraw its threats to impeach Han a second time if he does not appoint a ninth judge to the Constitutional Court soon. The court has also announced that it will issue a ruling April 4 on whether or not to uphold the impeachment against President Yoon Suk Yeol.
The Korean economy is likely to take a hit from the tariffs, and it must prepare for the worst-case scenario, including the possibility of failing to achieve even 1 percent growth in 2025. Trilateral cooperation among Korea, China and Japan could also serve as leverage, along with Korea's strengths in shipbuilding and growing investments in the United States, all without hollowing out manufacturing jobs. These are areas where the government and private sector must cooperate to navigate the challenges posed by Trump.