A year after the United States announced its reciprocal tariff policy in April last year, Korea's effective US tariff rate has fallen in ranking, with mixed results across product categories.
According to an analysis of US International Trade Commission (ITC) tariff statistics released by the Korea Chamber of Commerce and Industry (KCCI) on Tuesday, Korea's exports to the United States in the first quarter of this year totaled $36.74 billion (about 56.1938 trillion won), with tariff payments of $3.2 billion (about 4.8944 trillion won), bringing the effective tariff rate to 8.7%. This placed Korea sixth, following China (26.4%), India (14.1%), Japan (11.2%), Germany (10.3%) and Vietnam (9.9%).
However, with no tariffs imposed on certain items such as semiconductors and energy, Korea's effective tariff rate was higher than that of Taiwan and Thailand, which have large semiconductor export shares. It also exceeded that of Canada and Mexico, whose tariffs were lowered under the United States-Mexico-Canada Agreement (USMCA).
The effective tariff rate rose to 10% in the second quarter of last year and 13.5% in the third quarter, before gradually declining to 11.8% in the fourth quarter and reaching its lowest level in the first quarter of this year. The ranking also dropped from third in the second quarter of last year, representing the largest decline in burden ranking among the top 10 exporters to the US.
Korea's tariff payments on US exports ranked seventh among the top 10 exporters. Payments increased to $3.3 billion (about 5.049 trillion won) in the second quarter of last year, when the 10% universal tariff began, and to $4.23 billion (about 6.4731 trillion won) in the third quarter, before turning to a downward trend after the fourth quarter.
US tariffs peaked in the third quarter following the implementation of the 10% universal tariff in April last year and the entry into force of product-specific tariffs during the second quarter, including those on automobiles and parts (25%) and steel and aluminum (50%). However, they declined after the conclusion of Korea-US tariff negotiations and the reduction of the automobile tariff to 15% in November last year. In addition, following a February ruling this year that invalidated tariffs based on the International Emergency Economic Powers Act (IEEPA), a 10% tariff based on Section 122 of the Trade Act was partially reflected in late first-quarter statistics, further easing the burden.
Changes by export category were also significant. In the automobile sector, which accounts for the largest share of tariff payments, the effective tariff rate rose to 21.3% in the second quarter of last year and 23.8% in the third quarter, before falling to 18.9% in the fourth quarter and 13.5% in the first quarter of this year. Korea's tariff was lowered to 15% from November last year, widening the gap in the fourth quarter compared with Germany and Japan, whose tariffs were lowered earlier in August and September. However, in the first quarter of this year, Korea's rate fell below that of Germany (14.5%).
For steel and steel products, the effective tariff rate stood at 42.5% in the first quarter of this year following the implementation of the 50% product-specific tariff in June last year. This is lower than China (54%) but higher than Brazil (22.7%), whose exports center on pig iron and ferroalloys with lower tariff rates. However, the KCCI analyzed that the two countries are difficult to compare, as pig iron and ferroalloys, which are closer to raw materials, account for only 2% of Korea's total steel exports to the US, while most of its exports consist of finished products such as steel pipes and plates.
There are concerns that the situation of a lowered effective tariff rate could change abruptly. A KCCI official said, "It has been confirmed that the overall cost pressure on our companies has eased somewhat through tariff reductions from Korea-US negotiations, but trade uncertainty has not been resolved, as tariff rates on certain items such as steel remain high and product tariff issues such as those on semiconductors persist."
The official also said that tariff policy could change at any time, given that the Office of the US Trade Representative (USTR) is also conducting a Section 301 investigation under the Trade Act. Accordingly, the official stressed the need for monitoring of Section 232 tariff measures related to key export items such as semiconductors, as well as diplomatic support from the government.
Public-private collaboration was also emphasized. The point is that support to enhance the price competitiveness of Korean companies, such as domestic production tax credits and strengthened export financing, should continue, while medium- to long-term capacity building, including AX (AI transformation) in manufacturing, should be pursued in parallel.
Kang Min-jae, head of the KCCI's economic policy team, said, "Tension at corporate sites remains because of exchange rate and raw material burdens and external uncertainties. With companies facing a mountain of global issues, it is time for the public and private sectors to respond nimbly through teamwork."
