Korea on edge as 'America First' expands to nontariff trade barriers

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Korea on edge as 'America First' expands to nontariff trade barriers

Published: 14 Feb. 2025, 18:14

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

U.S. President Donald Trump holds up a signed executive order in the Oval Office of the White House on Feb. 13 in Washington. [AP/YONHAP]

U.S. President Donald Trump’s "America First" policy now extends to nontariff barriers, dampening Korea's hope of avoiding the anticipated reciprocal duties thanks to the free trade agreement (FTA) between the two countries.

The U.S. trade deficit with Korea is its eighth-largest at $66 billion, placing it among the highly probable main targets of Trump, who does not appear to take kindly to policies and laws that intend to protect domestic companies over foreign firms, such as Seoul's online platform law and EV subsidy programs that may be considered nontariff barriers.

Trump on Feb. 13 signed a presidential memorandum ordering the construction of a comprehensive plan to counter nonreciprocal trading arrangements with the intent of “reducing its trade deficit” and “restoring fairness,” according to the White House.

Trump declared “no exemption” on the tariff agenda, even specifically mentioning that he once exempted Chinese-made Apple products from tariffs to keep Korea’s Samsung Electronics in check.

Hyundai Motor and Kia vehicles are waited to be exported at a port in Pyeongtaek, Gyeonggi, on Feb. 11. [YONHAP]

Currently, Korea isn't subject to any tariffs on almost 98 percent of its exports to the United States based on the two countries' FTA. However, the reference to nontariff barriers, which includes any measure besides a customs tariff that restricts international trade, aims to bring Korean rules or policies that hinder and burden U.S. companies into consideration when setting reciprocal tariffs.

Korea is currently pushing to tighten its online platform law banning the dominance of certain online platforms like Google and Meta, which has been heavily opposed by U.S. politicians for unfairness.

Jamieson Greer, Trump’s nominee for United States Trade Representative, said in his Senate nomination hearing on Feb. 6 that any attempts by Korea and European countries to impose “discriminatory measures” affecting U.S. technology firms “won’t be tolerated.”

In the hearing, Republican Sen. Thom Tillis apparently cited a 2024 column in financial news outlet Barron's by Greer contending that the Korean law specifically targets U.S. firms like Apple and Meta, and will eventually benefit Chinese companies like TikTok, Temu and AliExpress.

“We are having a domestic conversation about how to regulate digital trade and technology companies, and my view is that is where the conversation should be happening,” Greer, a trade lawyer and official in the first Trump administration, said during the hearing.

Korea’s governmental subsidy program, which is normally generous to domestic firms, is also likely to be a main target.

Korea offers differential subsidies on EVs based on the available range on single charge. But as Korea’s certification process is quite a bit stricter than that of the United States, vehicles from foreign brands normally qualify for less favorable subsidies.

Cadillac’s Lyriq electric SUV, for instance, can travel up to 494 kilometers (307 miles) on a single charge according to the U.S. Environmental Protection Agency. In Korea, however, its range has been certified at 468 kilometers per charge based on the Ministry of Environment's standard.

It’s not entirely new for the U.S. government to take on Korea’s subsidy programs. The U.S. Department of Commerce in 2023 once imposed a 1.1 percent countervailing tariff on Korea’s steelmaking companies Hyundai Steel and Dongkuk Steel after Washington considered Korea’s low electricity rates only for local firms a discriminatory subsidy. The imposition, however, was nullified as the U.S. Court of International Trade ruled favorably for Korea that low electricity prices cannot be considered a subsidy after a year of thorough review.

Trump also hinted at an additional tariff on cars and semiconductor imports, which could target Hyundai Motor and Kia, whose profitability is currently heavily dependent on U.S.-bound exports. U.S. companies like Ford Motor publicly aired complaints about how the current U.S. tariff system exempts Korean and Japanese carmakers, which could encourage the realization of the imposition.

Trump's reciprocal duties will go into effect as soon as April 1. Deputy Minister for Trade Park Jong-won of the Ministry of Trade, Industry and Energy is scheduled to visit Washington on Feb. 17 to hold meetings with Trump administration officials to discuss the trade and tariff issues.

BY SARAH CHEA [[email protected]]