Editor’s Note
This article reports on U.S. tariff announcements. Please note that the specific rates mentioned, particularly a discrepancy between a stated 25% and an annexed 26% for South Korea, were based on initial statements and documents. Readers should consult official sources for final, verified figures.
U.S. President Donald Trump announced on the 2nd (local time) that he would impose a 25% tariff on all products imported from South Korea. Among South Korea’s major competitors, China will face a 34% tariff and Japan a 24% tariff. However, the White House listed the tariff rate for South Korea as 26% in an annex to the executive order. The White House stated in response to inquiries from Korean media that “the figure (26%) listed in the annex to the executive order should be followed.”
President Trump said as he personally announced these reciprocal tariff rates, based on each country’s tariff and non-tariff barriers, during an afternoon event at the White House Rose Garden.
The reciprocal tariffs unveiled by President Trump involve imposing a flat 10% tariff on all countries trading with the U.S., with differentiated higher rates applied to about 60 countries that maintain trade surpluses with the United States.
President Trump said, presenting the tariff rates that major U.S. trading partners impose on American goods. The rates he cited for counterpart countries were not actual tariffs but artificially synthesized rates combining government subsidies, currency policies, and non-tariff barriers.
For example, while South Korea has a free trade agreement (FTA) with the U.S., effectively eliminating tariffs, President Trump claimed that South Korea imposes a 50% tariff on the U.S. through non-tariff barriers. Based on this, he stated he would impose a 25% tariff on South Korea.
Using the same logic, President Trump stated that “China has imposed a 67% tariff on the United States,” leading to a reciprocal tariff of 34%. He decided to impose 20% on the EU, 46% on Vietnam, and 24% on Japan. Taiwan, despite TSMC—the world’s largest foundry—announcing a $100 billion investment in the U.S. last month, could not avoid a high reciprocal tariff of 32%.
The de facto sole exception to the reciprocal tariffs announced that day are products compliant with the USMCA free trade agreement between Mexico, Canada, and the U.S., interpreted as a measure to protect U.S. companies manufacturing in North America.
President Trump stated that the flat 10% base tariff, part of these country-specific reciprocal tariffs, would take effect on the 5th, while the individual tariffs for countries including South Korea would be implemented from the 9th. The previously announced 25% item-specific tariff on automobiles will begin to be levied separately from the 3rd.
However, the reciprocal tariffs will not be applied in duplicate to automobiles, steel, and aluminum that already have item-specific tariffs imposed under Section 232 of the Trade Expansion Act.
According to materials released by the White House, exceptions to the reciprocal tariffs were specified, including steel and automobiles. Additionally, items mentioned by President Trump for potential item-specific tariffs—such as copper, pharmaceuticals, semiconductors, and lumber—along with gold bullion and energy and specific minerals difficult to procure in the U.S., were also designated as exceptions.
Consequently, for automobiles, both South Korea and Japan are expected to be subject to the same 25% item-specific tariff on automobiles, not the country-specific reciprocal tariff. For semiconductors, which are anticipated to have item-specific tariffs designated later, item-specific tariffs are likely to take precedence over reciprocal tariffs. For instance, Samsung Electronics, which has a semiconductor factory in Vietnam, would be subject to item-specific tariffs on semiconductors rather than the 46% tariff on Vietnam.
The White House materials stated that the reciprocal tariffs would be lifted “until President Trump determines that the threat from the trade deficit and fundamental non-reciprocal treatment has been resolved or mitigated.” Simultaneously, they included a provision that “President Trump may increase or decrease tariffs in response to measures such as retaliation by counterpart countries.”
This is interpreted to mean that President Trump will likely personally lead negotiations on tariff rates, including the endpoint for the reciprocal tariffs.
Unlike previous tariffs imposed only on specific countries and items, the reciprocal tariffs announced that day are seen as expanding the ‘tariff bomb’ that President Trump had previously limited to some countries like China to the entire world. Responses from countries now facing unilateral tariff burdens are expected to become busy immediately. Both the European Union (EU) and China are likely to retaliate with counter-tariffs against the U.S. Japan has also requested a review of the U.S. tariff measures.
While President Trump confidently asserts that tariffs will make America wealthy, forecasts simultaneously suggest that the tariff policy could instead plunge the U.S. economy into recession. Goldman Sachs recently raised the probability of the U.S. economy entering a recession in one year from the previous 20% to 35%.
Consumers, concerned about price increases due to tariffs, have driven a surge in sales last month for major automakers including Hyundai. In a related opinion poll released by Marquette University Law School that day, 58% of U.S. consumers responded that President Trump’s tariff policy would negatively impact the U.S. economy.