US Eyes 100% Tariff on Semiconductors, Threatening Korean Exports
South Korea Seeks Assurances Amidst Shifting Trade Landscape
President Donald Trump’s announcement of a potential 100% tariff on semiconductors poses a significant threat to South Korea’s export-driven economy. This move follows earlier tariff impositions on automobiles and could heavily impact the competitiveness of Korean chip manufacturers.
Semiconductor Tariffs and Manufacturing Loophole
President Trump declared the intention to levy a substantial 100% tariff on semiconductors. However, he clarified that this measure would be waived for companies establishing manufacturing facilities within the United States. The specific timing for the implementation of these semiconductor tariffs remains undisclosed.
South Korea’s Trade Deal Expectations
The South Korean government indicated that during recent trade negotiations with the U.S., assurances were given regarding preferential treatment for items like semiconductors and pharmaceuticals. Specifically, South Korea expected to receive tariff rates no higher than those applied to other nations.
“If the tax rate is set at 15% at 15%, we will receive 15% if we set 15%. I don’t think it can be 100% or 200% in the future.”
—Kang Yoo-jeong, Presidential Spokesperson
Uncertainty Lingers Over Trade Agreement Details
Despite these assurances, significant uncertainty persists regarding the semiconductor tariffs. The recently concluded trade agreement between the U.S. and South Korea did not explicitly detail the tariff treatment for semiconductor products, leaving room for interpretation.
Mutual Tariffs and Shifting Trade Dynamics
As of the 7th, mutual tariffs are set to take effect, imposing rates ranging from 10% to 41% on Korean products entering the U.S. and vice-versa. This comes after South Korea agreed on the 30th of last month to reduce its tariff on U.S. automobiles from 25% to 15% in exchange for increased U.S. energy purchases.
For instance, the U.S. has confirmed that Japan will face additional tariffs on top of existing rates, rather than the previously agreed 15% mutual tariff, highlighting potential inconsistencies in tariff application. This development prompted the Japanese government to dispatch an economic envoy to Washington.
The semiconductor industry is a critical sector for South Korea, with the nation being a leading global supplier. According to the Semiconductor Industry Association, global semiconductor sales reached $583.5 billion in 2023, underscoring the sector’s economic significance.