Trump's reciprocal tariff likely to become reality in April: Uncertainty worsens situation

U.S. President Donald Trump announced that he will impose a ‘reciprocal tariff’ on his trading partners, considering tariff and non-tariff barriers. Usually, a mutual tariff imposes the same tariff as the partner imposes on the same foreign products, following a 'tit-for-tat' approach. However, the Trump administration vows to impose high specific tariffs customized to each nation, even considering factors beyond tariffs, such as subsidies the partner provides to its firms and foreign exchange policy that artificially devalues its currency.

Signing the executive order implementing the reciprocal tariff starting in early April, President Trump stated that all countries take advantage of the U.S. one way or another, no matter if it is a strategic competitor like the Community Party China or allies such as the EU, Japan, or South Korea. Such a comment implies that even South Korea, which abolished 98% of the tariff on traded goods with the U.S. through the Free Trade Agreement, may no longer be in the safety zone.

The areas of excuses are widening for the U.S. to take issue with, including anti-trust regulations against U.S. big tech platform giants, tax schemes unfavorable to foreign companies, complicated customs procedures, subsidies to exporters, etc. We generally have stronger regulations than the U.S. and more rigorous quarantine standards for agricultural and livestock products. We gained the 9th trade surplus partner to the U.S. in 2024, which has grown sharply over a couple of years. Such growth would likely work against us.

On top of that, concerns are rising that the plan to give subsidies may be renegotiated, promised under Joe Biden's CHIPS Act to the South Korean semiconductor companies building plants in the U.S. Samsung Electronics and SK Hynix may even have to reassess their entire global investment plan as they signed the contracts with the U.S. government worth 6.8 trillion KRW and 660 billion KRW respectively.

The Trump administration’s relentless rollout of high-impact tariff policies is particularly threatening because it is difficult to predict which countries will be targeted, under what pretext, and at what rates. If South Korea’s diplomatic and trade authorities fail to anticipate U.S. intentions and take proactive measures, the damage to South Korean businesses could become irreparable.