Trump Puts Spotlight on South Korean ‘Higher-Than-China’ Tariffs

Article content

(Bloomberg) — President Donald Trump pointed to South Korea as a country with more unfair tariffs against American products than China, while slamming the handing out of subsidies for foreign chipmakers like Samsung Electronics Co.

Article content

Article content

“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 to a joint session of Congress. “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.”

Article content

Trump’s comments are likely to be a cause for concern for policymakers and businesses in South Korea as an indication that the president will eventually turn his attention to trade and security relations with Seoul. 

South Korea’s currency briefly weakened against the dollar to about 1,460 won after Trump mentioned South Korea’s tariffs, before paring losses. Samsung shares remained largely unchanged.

The president also mentioned Mexico and other nations with trade surpluses with the US that impose duties on American products. Still, his comments underscore the high level of unfairness he feels toward South Korea, a supplier of everything from automobiles to semiconductors to the US. 

South Korea said last month that its tariffs on manufactured goods from the US are effectively zero under a free trade agreement that took effect in 2012. Seoul does apply hefty tariffs on some agricultural goods including rice.

Bloomberg Economics estimates that the mere threat of US tariffs could trim 0.8% from South Korea’s gross domestic product this year, with the impact concentrated in the second half.

Article content

Article content

South Korea may face other issues with Trump’s administration, too. Seoul relies on security guarantees from Washington to deter North Korean aggression. Trump last year referred to its ally as a “money machine” as he reiterated his demand that South Korea shoulder more of the upkeep for American troops stationed on the Korean Peninsula.

During his speech, Trump also blasted the Chips and Science Act introduced under the Biden administration, calling it a “horrible, horrible thing.” 

The president didn’t mention Samsung, the South Korean builder of memory chips that is a major recipient of subsidies under the act for a plant it’s building in Texas. But his comments rekindle concerns that the program may be canceled for foreign manufacturers setting up operations in the US.

“They will come because they won’t have to pay tariffs if they build in America,” he said. “You should get rid of the chip act, and whatever is left over, Mr. Speaker, you should use it to reduce debt or any other reason you want to.”

What Bloomberg Economics Says…

“The threat of new US tariffs, and the uncertainty that comes with it, could curb exports and output through delayed decisions by South Korea’s exporters and reduced US demand for imports.”

Article content

— Hyosung Kwon, economist

For the full report, click here.

In other comments pertaining to South Korea, Trump said the ally is among nations that want to partner in a natural gas pipeline in Alaska. US officials have touted the promise of the project to Asian policymakers, including Japan’s prime minister and South Korea’s trade minister.

South Korean officials visited Washington last week, calling on its longtime ally to exempt Seoul from Trump’s planned tariffs. South Korea relies heavily on trade for economic growth, with its largest companies generating the bulk of their revenues overseas. 

Even the latest tariffs on China, Mexico and Canada will impact South Korea indirectly by hitting demand for items that eventually end up in the US.

—With assistance from Jaehyun Eom.

Article content