U.S. Imposes 'Section 301 Forced Labor Tariff'... Korea Hit with 12.5% (Comprehensive)

Higher Tariff Rate Than Mexico and India
Exclusions for Automobiles, Semiconductors, and Steel
Protecting the 15% Tariff Cap Is Key

The administration of U.S. President Donald Trump officially announced on the 23rd (local time) that it will impose forced labor tariffs of 10% to 12.5% on 60 economic territories under Section 301 of the Trade Act. A tariff rate of 12.5% was imposed on Korea, citing insufficient measures to ban the import of forced labor products. Although the Korean government argued last month that the factual basis is different, a higher tariff rate was set compared to Mexico and India. As a result, whether the Korean government can uphold the maximum tariff rate cap of 15% during the final tariff determination, including future additional investigation results, has become a top concern.

Jamison Greer, United States Trade Representative (USTR), appeared at the U.S. Senate Finance Committee hearing on the 22nd (local time) and held up trade-related documents by hand. Photo by Reuters Yonhap News

The U.S. Trade Representative (USTR) announced on this day that tariffs of 10% to 12.5% would be finalized on 60 territories for the import of products produced through forced labor. This measure takes effect from 12:01 a.m. Eastern Time on the 24th (1:01 p.m. Korean time). It replaces the temporary global tariff of 10% that had been introduced following a U.S. Supreme Court ruling nullifying reciprocal tariffs in February.

Jamieson Greer, United States Trade Representative, stated, "President Trump has recognized that, despite decades of moral persuasion, forced labor has not been eradicated from global supply chains," adding, "The United States has banned the import of goods made with forced labor for nearly a century and has enforced these laws strictly. It is time for our trade partners to implement the same measures."

The applicable tariff rates differ by country. Seventeen economic territories, including Canada, Mexico, the United Kingdom, and India, are subject to a 10% tariff rate. For Korea, Japan, and Switzerland, if their existing Most Favored Nation (MFN) tariff is lower than 12.5%, the Section 301 tariff will be added so that the final tariff rate is brought up to 12.5%. If the MFN tariff is 12.5% or above, no additional tariff will be imposed. For Taiwan and the EU, the final tariff rate, including the MFN tariff, is set at 10%. For the other 38 territories, including China and Brazil, an additional 12.5% is applied to the existing MFN tariff. Initially, India was proposed to receive a 12.5% rate, but after implementing a forced labor import ban policy, it was reduced to 10%. However, items related to national security, such as automobiles, steel, and semiconductors (covered under Section 232 of the Trade Expansion Act), as well as pharmaceuticals and raw materials with supply chain disruption concerns, are excluded from the tariffs.

The Korean government submitted an objection to the USTR last month after the higher forced labor tariff rate of 12.5%, rather than 10%, was proposed. In its written opinion submitted to the USTR through the Embassy in Washington, the Korean government stated, "The assertion that Korea has negatively impacted U.S. trade by importing products produced with forced labor does not align with actual trade data," and "We respectfully request a re-examination in light of the factual details." The government also refuted the evaluation that Korea imported rice and peanuts from certain countries utilizing forced labor, stating that this does not match statistics from actual trade data.

The Korean government considers the 15% maximum tariff rate, stipulated in the Korea-U.S. trade agreement, as its "red line" for the final tariff rate and is mobilizing all resources in response. The U.S. government will finalize the tariff rates after including the outcome of an investigation into overcapacity. Kim Jungkwan, Minister of Trade, Industry, and Energy, and Yeo Han-koo, Trade Minister, both recently visited the United States to communicate the government's concerns to negotiation partners and ensure that the total overcapacity tariffs do not exceed 15%. If the aggregate tariff surpasses the cap, Korea risks fulfilling its $350 billion investment pledge to the United States without benefiting from tariff reduction effects gained through previous agreements.

Kim Jungkwan, Minister of Trade, Industry and Energy, is meeting with U.S. Secretary of Commerce Gina Raimondo on the 23rd (local time) at the Mayflower Hotel in Washington DC, USA. Photo by Yonhap News Agency

The Ministry of Trade, Industry and Energy stated immediately after the forced labor tariffs were announced that "the U.S. side has reaffirmed its position that existing trade agreements must also be respected." A presidential office official added, "Both Korea and the U.S. share a consensus that tariff agreements must be respected," and emphasized, "We will continue to work closely with the U.S. to ensure the 15% cap agreed upon between the two governments is maintained."

Countries are exploring how to respond. According to the USTR, the 60 territories affected by the forced labor tariffs account for 99.4% of U.S. trade. Brazil and Canada, who had previously been hit with additional tariffs of 25% and 50% respectively, are facing major challenges. For Brazil, which is subject to a 12.5% tariff under the forced labor measure, both the newly announced 25% tariff and the 12.5% tariff will be applied to items such as shoes and machinery/equipment. Canada, while included among the tariffed territories, will see certain items subject to a 50% tariff starting August 19. Mark Carney, Prime Minister of Canada, who is currently negotiating with the U.S., stated on the same day, "All options are on the table," and said that Canada is reviewing every possible response according to the outcome of its negotiations with the United States.

This content was produced with the assistance of AI translation services.