South Korea faces up to 12.5% tariff after US global levy expires

South Korean goods could face a new tariff of up to 12.5% after the Trump administration's 10% global levy expires July 24.

According to trade authorities Wednesday, the Office of the United States Trade Representative accepted written submissions from trading partners through Monday on forced-labor-related tariffs under Section 301 of the Trade Act.

The process for imposing tariffs of 10% to 12.5% on 60 economies, including South Korea, is nearing completion. The USTR plans to hold a public hearing Thursday before setting a final rate.

The South Korean government and the Korea International Trade Association submitted comments arguing that a 12.5% additional tariff on South Korean products lacks sufficient grounds and should be reconsidered. They also requested that, if a tariff is unavoidable, the rate be lowered to 10%.

"We included that in our submission in the hope that a somewhat lower tariff would be applied," said Cho Seong-dae, head of the trade research division at KITA. "Realistically, however, the chances of the United States accepting that and reducing the rate do not look particularly high."

The Trump administration has imposed a 10% global tariff on trading partners worldwide under Section 122 of the Trade Act since a US Supreme Court ruling in February found the reciprocal tariffs unlawful.

Section 122 caps the duration of such tariffs at 150 days, meaning the global levy expires July 24. The administration has been moving to introduce a replacement tariff under Section 301 before that deadline.

Yet a separate Section 301 investigation into overproduction — launched by the USTR in March alongside the forced-labor probe — has shown no signs of progress.

The USTR had originally scheduled completion of both investigations before the global tariff expired.

Even at the time, the prevailing view was that wrapping up all the investigations within five months would be all but impossible. Past cases show that a Section 301 investigation targeting a specific issue in a single country typically takes more than a year.

A notable example: when the USTR launched a Section 301 investigation in August 2017 targeting China alone over intellectual property violations, tariffs were not imposed until July 2018 — 11 months later.

Unlike the forced-labor investigation, which was relatively straightforward because it relied on legal and institutional shortcomings in trading partners' own systems, the overproduction probe requires painstaking verification of country-by-country and industry-by-industry data, making a lengthy timeline unavoidable.

The USTR has opened Section 301 overproduction investigations covering 16 economies, including South Korea.

Even if findings on overproduction were to emerge immediately, analysts broadly agree that introduction before the global tariff deadline is effectively off the table, given the mandatory steps still required — including a comment period and public hearings.

For now, the forced-labor tariff is likely to serve as the de facto replacement for the global levy.

There are concerns, however, that if the forced-labor tariff is set at 12.5%, any additional measures stemming from the USTR's overproduction investigation could push the total tariff burden on South Korean goods above 15%.

The government has accordingly vowed to do everything in its power to ensure that tariffs on South Korea do not exceed the 15% ceiling agreed last year, even if Washington presses ahead with further tariff measures tied to overproduction or other issues.

South Korea secured a reduction of the threatened 25% reciprocal tariff to 15% last year after committing to $350 billion in US investment through trade negotiations.