U.S. restores tariffs, caps South Korean goods at 12.5%
· UPIJuly 24 (Asia Today) -- The Trump administration imposed tariffs of 10% to 12.5% on goods from 60 economies Thursday, citing their failure to adequately block imports made with forced labor.
Most South Korean products covered by the measure will be subject to a combined tariff of no more than 12.5%, including the existing most-favored-nation duty and the new tariff imposed under Section 301 of the Trade Act of 1974.
The measure does not add a uniform 12.5% duty on top of existing tariffs on South Korean products.
Instead, when the existing tariff on a South Korean product is below 12.5%, the United States will impose an additional duty equal to the difference. No additional Section 301 duty will be imposed when the existing rate is already 12.5% or higher.
The arrangement gives South Korea, Japan and Switzerland more favorable treatment than most of the economies subjected to the new tariffs. It also places their effective ceiling below the 15% rate included in their broader trade arrangements with the United States.
The next major uncertainty for South Korea is a separate U.S. investigation into structural excess production capacity in manufacturing. That investigation could lead to additional tariffs and renew questions about whether the 15% ceiling negotiated between Seoul and Washington would apply.
New tariffs replace expiring global surcharge
U.S. Trade Representative Jamieson Greer finalized the measures at President Donald Trump's direction after investigations into 60 economies.
The new tariffs took effect at 12:01 a.m. EDT Friday, or 1:01 p.m. Korea time.
A temporary 10% global import surcharge imposed under Section 122 of the Trade Act expired at the same time, allowing the administration to replace it without creating a gap in tariff coverage.
The European Union's 27 member countries are treated as one economy in the investigation. As a result, the measure covers more than 80 countries and territories accounting for about 99% of U.S. imports.
The Office of the U.S. Trade Representative concluded that the economies had failed to prohibit imports made wholly or partly with forced labor or had failed to effectively enforce such prohibitions.
The agency said those practices exposed U.S. businesses and workers to unfair competition.
"For decades, moral suasion failed to eradicate forced labor from global supply chains," Greer said.
He said the United States had prohibited the importation of forced-labor goods for nearly a century and expected its trading partners to adopt and enforce similar restrictions.
The trade representative began the 60 investigations March 12. The agency held public hearings, collected thousands of comments and consulted with more than 45 foreign governments before announcing its final action.
Four tariff groups established
The administration divided the 60 economies into four categories.
The European Union and Taiwan received a combined tariff ceiling of 10%, including existing most-favored-nation duties.
For products from those economies with an existing tariff below 10%, the United States will add a Section 301 duty sufficient to bring the total to 10%. Products already carrying a tariff of 10% or more will face no additional duty under the investigation.
South Korea, Japan and Switzerland received similar treatment with a 12.5% ceiling.
Products from those countries with existing tariffs below 12.5% will face an additional duty equal to the difference. Products with existing tariffs of at least 12.5% will not face an additional Section 301 tariff.
The White House said the treatment was consistent with each economy's trade agreement or similar arrangement with the United States.
Seventeen economies received a flat 10% tariff because they had introduced forced-labor import restrictions, operated partial restrictions or committed to adopting such measures.
They include Argentina, Bangladesh, Cambodia, Canada, Ecuador, El Salvador, Guatemala, Honduras, India, Indonesia, Jordan, Malaysia, Mexico, Pakistan, Sri Lanka, Britain and Trinidad and Tobago.
The remaining 38 economies received a 12.5% tariff.
That group includes China, Australia, Brazil, Hong Kong, Israel, Peru, the Philippines, Saudi Arabia, Singapore, Thailand and Vietnam.
India had initially been considered for the 12.5% rate but was moved to the 10% group after adopting restrictions on imports produced with forced labor.
The United States has not concluded that any of the investigated economies both maintains and effectively enforces a comprehensive forced-labor import ban. It remains unclear whether any country could eventually have its tariff reduced to zero.
Certain products excluded
The new tariffs do not apply to several categories of goods considered critical to the U.S. economy.
Exemptions include some raw materials that cannot be produced in sufficient quantities domestically, products that could cause economy-wide disruption and goods for which the tariff would not substantially advance the administration's stated forced-labor objectives.
Energy products, some fertilizers and other materials that the United States cannot produce in adequate quantities are among the exclusions.
Products already subject to national security or industry-specific tariffs generally will not be charged twice.
That includes automobiles and auto parts, steel, aluminum and products subject to separate tariffs under Section 232 of the Trade Expansion Act.
Goods meeting the rules of origin under the United States-Mexico-Canada Agreement are also excluded.
Products shipped before the new tariffs took effect may receive transitional treatment if they enter the United States by the administration's customs deadline.
The White House also directed the trade representative to establish tariff-rate quotas for certain textile and apparel imports from Bangladesh, Cambodia, Indonesia and Malaysia.
The quotas would allow some products to enter without the new tariff if the exporting economies increase their use of U.S. cotton or textile inputs.
Administration turns to Section 301
The measure replaces the temporary 10% surcharge imposed in February under Section 122 of the Trade Act.
That law allows the president to impose temporary import restrictions for up to 150 days in response to serious international payment problems. Extending the measure beyond that period would require congressional action.
Section 301 provides a separate legal mechanism.
It allows the trade representative to investigate foreign government practices considered unreasonable, discriminatory or burdensome to U.S. commerce and to impose tariffs after consultations, public comments and hearings.
The administration is using the statute to rebuild much of the tariff structure that followed Trump's earlier reciprocal tariff policy.
The Supreme Court had invalidated the previous reciprocal tariff framework, prompting the administration to seek authorities with more established statutory procedures.
The forced-labor action has also drawn criticism that the administration selected a broad human rights issue to justify tariffs it had already intended to impose.
Peter Harrell, a former Biden administration official, said the forced-labor investigation appeared to be serving as a vehicle for tariffs desired by Trump.
Rep. Richard Neal of Massachusetts, the senior Democrat on the House Ways and Means Committee, also questioned the timing of the action as the temporary global surcharge expired.
The administration maintains that forced labor is both a human rights abuse and a trade-distorting practice that reduces production costs and disadvantages American workers and companies.
Importers receive refunds from invalidated tariffs
U.S. Customs and Border Protection has begun refunding reciprocal tariffs invalidated by the Supreme Court to thousands of U.S. importers.
Nike expects to recover about $1 billion in previously paid duties.
The refund illustrates the direct costs the former tariff structure imposed on U.S. companies importing products from abroad.
Nike Chief Financial Officer Matthew Friend said tariffs were nevertheless expected to remain a significant cost because the new Section 301 duties immediately replaced the expiring global surcharge.
The administration's change in legal authority therefore does not eliminate the tariff burden faced by American importers. It restructures the legal basis and the rates applied to different trading partners.
Excess-capacity investigation poses next risk
The immediate economic impact of the new rates could be limited because they are close to the expiring 10% global surcharge.
The larger risk for South Korea may come from the trade representative's investigation into structural excess capacity and manufacturing overproduction.
The agency opened that investigation March 11 against 16 economies, including South Korea, China, the European Union, Japan, Taiwan, Vietnam, India and Mexico.
The investigation is examining whether government policies or industrial structures encourage manufacturers to produce more goods than their domestic markets can absorb.
The Trump administration argues that such production displaces U.S. manufacturing, suppresses prices and discourages investment in American factories.
The investigation could affect industries in which South Korean companies are major exporters, although the U.S. government has not announced final product categories or tariff rates.
Greer said the excess-capacity investigation was taking longer than the forced-labor cases because the government was following the procedures required by law.
No timetable has been announced for its completion.
It also remains unclear whether tariffs resulting from the investigation would be added to the forced-labor duties or adjusted to prevent overlapping charges.
An additional tariff could again test the 15% ceiling included in the trade agreement between South Korea and the United States.
The key question will be whether Washington treats an excess-capacity tariff as covered by the negotiated ceiling or as a separate trade remedy that can be imposed on top of it.
The Trump administration is also using other trade laws to expand its tariff policy, including Section 338 of the Tariff Act and Section 232 of the Trade Expansion Act.
South Korea has secured a 12.5% combined ceiling for products covered by the forced-labor action. That treatment is more favorable than the flat rate imposed on many other trading partners.
The benefit could prove temporary, however, if the United States imposes separate duties following its excess-capacity investigation.
-- Reported by Asia Today; translated by UPI
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Original Korean report: https://www.asiatoday.co.kr/kn/view.php?key=20260724010008823