The Office of the United States Trade Representative (USTR) announced on the 2nd (local time) that it plans to impose tariffs under Section 301 of the Trade Act on 60 major trading partners, including Korea. The stated reason was that these countries have not sufficiently established the laws, systems, and enforcement frameworks needed to block imports of goods produced with forced labor. The trade community sees this as a full-fledged move to impose tariffs ahead of the expiration next month of the so-called global tariff under Section 122 of the Trade Act, and there are calls for proactive responses to minimize tariff increases.

USTR concluded that all 60 countries under investigation have not sufficiently established laws, systems, and enforcement frameworks to block imports of goods made with forced labor, and that they are not implementing such systems effectively. Based on the findings, it recommended imposing a 12.5% tariff on 54 countries, including Korea.

From the standpoint of the countries targeted, the measure can certainly feel unfair. Even more aggrieved may be the six jurisdictions of Canada, Ecuador, the European Union, Indonesia, Mexico, and Pakistan. For these, USTR recommended a 10% tariff even though they either have domestic regimes banning imports of goods made with forced labor or have pledged such bans through trade agreements with the United States.

The trade community views this as essentially a step to prepare for the expiration of the global tariff. In February, after the Supreme Court ruled that reciprocal tariffs under the International Emergency Economic Powers Act (IEEPA) were invalid, the Donald Trump administration began imposing a 10% global tariff under Section 122 of the Trade Act. However, Section 122 allows imposition for up to 150 days. Extending it requires congressional approval, and in practical terms it is highly likely to expire on the 24th of next month.

A trade industry source said there are two main aspects to the underlying intent of the United States, adding that first, with the end of the Section 122 global tariff approaching, there is an attempt to rebuild the existing tariff framework on a clearer legal basis under Section 301. U.S. courts have recognized relatively broad authority under Section 301 among the various statutes that authorize tariff imposition. The source continued that there also appears to be an intention to spread the U.S.-style import ban regime on forced labor across major trading partners, and that going forward the United States is likely to use labor, supply chain, and import control regimes as bargaining chips in trade agreements or additional negotiations with major partners to align them with U.S. standards.

The U.S. administration is also investigating the status of overcapacity in major trading partners, including Korea, in order to impose tariffs under Section 301. Recommendations for tariffs related to overcapacity are expected by mid-June at the latest. If it finds that Korea is not taking sufficient measures on overcapacity, an additional 12.5% tariff could be imposed. However, there is an outlook that tariff rates could be adjusted through the written submissions and hearings scheduled for next month. Another trade industry source said that for tariff accord countries such as Korea there may be greater room for adjustment, calling for active responses by the authorities.

The government emphasized that it is actively communicating to USTR that a balance of interests between the two countries must be maintained. On the 3rd, in Paris, France, where the OECD Ministerial Council was held, Yeo Han-gu, head of trade negotiations at the Ministry of Trade, Industry and Energy, met with USTR representative Jamison Greer and discussed the Section 301 investigation findings and a broad range of trade issues.

Yeo stated that not only the latest Section 301 findings but also any future bilateral trade issues should be discussed within the framework of the Korea-U.S. tariff accord rather than through new tariff measures, adding that he will continue close communication with the United States and respond calmly to the remaining Section 301 procedures so that bilateral trade issues between Korea and the United States can be managed in a stable manner.