Trump's Section 301 tariffs loom as 10% global levy expires Friday

The 10% global tariff that the Donald Trump administration imposed as a temporary measure following a Supreme Court ruling against its reciprocal tariffs will expire Friday. With the United States expected to soon unveil replacement duties under Section 301 of the Trade Act, the central question is whether the 15% tariff cap agreed upon under the South Korea-US trade deal will hold.

The Office of the US Trade Representative has been conducting investigations since March under Section 301 of the Trade Act into two areas: "structural overcapacity" and "forced labor." The probe was launched in preparation for the expiration of the 10% global tariff — imposed after the Supreme Court ruled in February that reciprocal tariffs based on Section 122 of the Trade Act were unlawful — which expires 150 days later on Friday.

The USTR cited as grounds for the investigation that imports of goods produced through structural overcapacity and forced labor are harming US trade. Section 301 of the Trade Act allows the administration to impose tariffs and other retaliatory measures against foreign governments' unfair or discriminatory policies and practices.

The investigation covers 16 economies in the overcapacity category and 60 in the forced labor category. South Korea is included in both.

In the forced labor category, a plan to impose tariffs of 10 to 12.5 percent was made public earlier in June, and public hearings have already been completed, leaving only the final announcement.

The overcapacity tariffs, by contrast, have not even had a proposed rate announced yet. Given that public hearings would still need to follow any announcement, a final determination before Friday appears impossible.

Observers expect the USTR to finalize and announce the forced labor tariffs first — possibly as early as this week — to coincide with the expiration of the global tariff.

Although affected countries were given the opportunity to submit counterarguments through public hearings, the forced labor tariffs were designed from the outset to replace the global tariff, and the timeline has been too short for a thorough investigation. The tariffs are therefore expected to be finalized largely as proposed, with few changes.

Once the overcapacity tariffs are finalized following a separate notice period, they will be added on top of the forced labor tariffs. For South Korea, that means the overcapacity tariff would be stacked on top of the 12.5 percent forced labor tariff already announced.

South Korea and the United States reached a trade agreement capping tariffs at 15 percent. If the USTR's Section 301 tariffs push the total above that level, it would amount to a breach of the deal.

USTR chief Jamieson Greer publicly stated earlier in June that he would respect the tariff ceiling set under the trade agreement. Sources said the 15 percent cap has also come up in high-level communications between South Korean and US officials, with assurances that it would be honored.

How exactly the 15 percent cap would be maintained, however, remains unclear. One possibility is that the overcapacity tariff would be imposed separately and then reduced to keep the total at 15 percent; another is that conditions would be attached to arrive at that figure.

Either way, if South Korea ends up bearing a burden exceeding 15 percent in any form, criticism that the trade agreement has been violated would be unavoidable.

The USTR recently imposed a 25 percent tariff on Brazil under its Section 301 investigation, but South Korea's situation differs.

Brazil had not concluded a trade agreement with the United States, and the 25 percent tariff followed a broader investigation into unfair trade practices.

Brazil is also among the 60 countries covered by the forced labor investigation, meaning forced labor tariffs, once finalized, would be added on top of the existing 25 percent.

Meanwhile, South Korea and the United States agreed last July to reduce reciprocal tariffs from 25 percent to 15 percent, contingent on South Korea committing $350 billion in investment in the US, among other conditions. Of that amount, $150 billion was earmarked for shipbuilding cooperation. A ceremony to open the Korea-US Shipbuilding Cooperation Center is scheduled for Thursday in Washington, D.C.