March 11, 2025
SEOUL – US President Donald Trump’s March 4 claim that South Korea levies tariffs four times higher than those of the US has sparked controversy about its accuracy as well as concerns about the possible intent behind the statement.
“China’s average tariff on our products is twice what we charge them, and South Korea’s average tariff is four times higher,” Trump said in a speech at a joint session of Congress last week. “Think of that, four times higher, and we give so much help militarily and in so many other ways to South Korea, but that’s what happens. This is happening by friend or foe.”
Trump singling Korea out has stoked concerns among policymakers and businesses here, fearing that Asia’s fourth-largest economy could be next in line for “reciprocal tariffs” by the US leader. Trump might attempt to justify such a move by claiming that South Korea puts significantly higher duties on American imports.
Here, The Korea Herald checks the facts behind Trump’s claims and sheds light on his possible motives behind them.
Fact-checking Trump’s tariff claim
Trump did not provide any details on where he got his tariff figures. However, observers say his words could be erroneously based on the most-favored-nation tariffs ― the standard tariff rates countries impose on imports from other members of the World Trade Organization unless there is a preferential tariff arrangement like an FTA.
Seoul’s MFN tariff rate stands at 13.4 percent, approximately four times higher than the US rate of 3.3 percent. But this doesn’t apply with the US, which has a free trade deal with Korea since 2012 and is subject to preferential tariffs.
“Under the Korea-US Free Trade Agreement, both Korea and the US have eliminated tariffs on most goods. As of 2024, Korea’s effective tariff rate for goods imported from the US is approximately 0.79 percent,” the Industry Ministry clarified immediately after Trump’s remarks. The rate drops further when considering refunds, it added. Some imported goods qualify for additional duty refunds.
The tariff rate for US imports is expected to decrease even more this year under a scheduled reduction plan, according to the ministry.
The US Trade Representative’s annual National Trade Estimate Report on Foreign Trade Barriers also stipulates that most of the tariffs between the two countries have been removed.
“The KORUS entered into force on March 15, 2012. Korea immediately eliminated duties on nearly 80 percent of bilateral trade in industrial and consumer goods,” it said. “Duties on most other such goods were phased out in stages over 10 years and have been eliminated as of Jan 1, 2021.”
Then why did Trump resort to such a claim? What was his actual motive behind it?
“Trump has long expressed dissatisfaction with the trade deficit with South Korea,” said Han Ah-reum, a senior researcher at the Korea International Trade Association, noting that his claim about a fourfold tariff difference appears to be in reference to the MFN rates, not FTA rates.
“Ultimately, this appears to be an attempt to apply pressure on South Korea by citing tariff rate differences that are not actually in effect,” she said.
Shin Won-kyu, a researcher at the Korea Economic Research Institute, echoed a similar stance and stressed the need to read between the lines and grasp Trump’s actual strategy.
“Trump appears to (be attempting to) maintain a position of leverage (over South Korea) by stressing the issue. His claim is not entirely baseless since there is indeed a fourfold difference in average tariff rates. But (since that doesn’t apply in US-South Korea trade,) he is presenting it in a way that fosters anxiety and misunderstanding,” said Shin.
“So it is important to figure out what his real demands are, which is to address the trade deficit and defense cost-sharing. Rather than getting caught up in the ‘four-times’ claim, it is important to recognize the broader strategy at play.”
What’s on Trump’s mind: Trade deficit
Right after mentioning South Korea, Trump talked about plans to impose “reciprocal tariffs” which he claims will address the US’ trade imbalances.
“April 2, reciprocal tariffs kick in, and whatever they tariff us, other countries, we will tariff them. That’s reciprocal, back and forth,” said Trump in the March 4 speech.
Trump has a longstanding view that the US trade deficit ― which means the US imports more than it exports ― is the result of unfair trade policies by other countries. The US, which has run a consistent trade deficit since 1976, hit a high of $1.2 trillion in trade deficit last year.
The US posted a $66 billion trade deficit with South Korea last year, according to US figures, making Korea the ninth largest contributor to this figure in the US.
The figure is hard to miss for Trump, who is fixated on shrinking this deficit. But the number itself is not the whole story, according to many experts.
A big chunk of South Korea’s imports to the US consist of intermediate goods ― things like semiconductors, battery components, displays and steel that are used to make other products ― that are essential for US manufacturing. Data from the Export-Import Bank of Korea shows these materials accounted for over half of South Korea’s exports to the US during both the first Trump term and Biden’s term.
Over the past three years, Korean conglomerates like Samsung, Hyundai, SK, LG and Hanwha have injected over $114 billion into the US, building plants and creating jobs. The recent uptick in the trade deficit reflects the local materials being shipped in to construct these new facilities.
Another reason behind the US’ record trade deficit is the strong US dollar, which makes it more expensive for other countries to buy American products while making imports cheaper.
Many agree it is important for South Korea’s government officials to explain the reality behind the numbers and negotiate so that Korea won’t be disadvantaged.
Since Trump’s inauguration, South Korean business and government officials have been rushing to the US to meet with Trump administration officials, requesting that South Korean businesses not face disadvantages via Trump’s tariffs.
South Korea’s National Security Adviser Shin Won-shik was the latest to visit Washington. Shin met with his US counterpart Michael Waltz on Thursday and explained that tariffs are barely imposed on US goods under the FTA. His explanation was said to have met with understanding from Trump’s national security adviser.
Beyond tariffs: nontariff barriers
Another topic Trump touched on during this March 4 speech was nontariff barriers, which restrict imports or exports of goods or services by means other than duties.
“If they do nonmonetary tariffs to keep us out of their market, then we will do nonmonetary barriers to keep them out of our market,” he said while talking about his April 2 reciprocal tariff plans.
Experts also stress that trade relations between Seoul and Washington are not just about tariffs but also involve nontariff barriers.
“The US has consistently raised concerns about South Korea’s regulatory environment in its annual National Trade Estimate report,” said Han. “Issues such as technical barriers to trade and various regulations have been cited as obstacles for American businesses.
She noted that some US policymakers have voiced concerns about South Korea’s proposed online platform regulations, claiming that they would be “unfair” to Big Tech based in the US.
“Some US political circles have been sending messages mixed with complaints that the Platform Competition Promotion Act is a ‘discriminatory’ measure targeting (US) Big Tech companies. These people see it (Trump’s threat of reciprocal tariffs) as a means of pressuring people (in Korea) to ease these regulations,” she said.
Another potential point of conflict in nontariff barriers is the value-added tax system, which Trump previously stated that the US will treat the same as tariffs for purposes of calculating reciprocal tariffs.
“We will consider countries that use the VAT system, which is far more punitive than a tariff, to be similar to that of a tariff,” Trump posted on Truth Social, the social media platform he owns, last month.
South Korea imposes a flat 10 percent VAT on both imports and domestically manufactured goods, applying it at every stage of the supply chain. In contrast, the US does not have a VAT system but applies a sales tax system, which varies by state and is only charged at the final point of sale to consumers.
While Trump’s stance on VAT appears primarily aimed at the European Union ― where the average VAT rate is around 20 percent, far higher than the typical US sales tax ― observers warn that Korea could also find itself in the crosshairs.
“The US doesn’t have a national-level VAT, but state-level sales taxes that generally hover at around 10 percent,” said KERI researcher Shin. “This fundamental difference (created by the different methods of) taxation (in the US vs. in South Korea) could potentially be framed as ‘discriminatory,’ even though VAT is refundable to businesses, including foreign firms that have entities in Korea.”