USTR to impose additional tariffs on imports from 60 economies for failing to prevent forced labor products

The U.S. Trade Representative (USTR) plans to impose additional tariffs of 10% or 12.5% on imports from 60 economies that have failed to prevent transactions of products made with forced labor, it was announced on the 2nd (local time).

South Korea was included in the group of 54 economies that failed to both introduce and effectively enforce import bans on goods produced by forced labor, and will be subject to a 12.5% tariff.

Most of the investigated countries, including Australia, Brazil, China, Japan, Malaysia, Norway, Russia, Saudi Arabia, Singapore, Switzerland, Taiwan, Thailand, Turkey, the United Kingdom, and Vietnam, are included in the same group as South Korea.

A 10% tariff was proposed for six economies – Canada, Ecuador, the European Union (EU), Indonesia, Mexico, and Pakistan – which are currently implementing import ban measures, have promised to do so, or have partially introduced related systems.

The USTR explained the background, stating that the policies and practices of the 60 economies that have not properly addressed measures related to the trade of products made with forced labor are considered "unreasonable and burden or restrict U.S. commerce."

Previously, the USTR initiated an investigation in March based on Section 301 of the Trade Act to replace the reciprocal tariffs that the Supreme Court ruled illegal in February.

This is a step towards imposing additional tariffs on the investigated countries following an investigation targeting 'overproduction' and 'import of products made with forced labor.'

South Korea was included in the investigation for both areas.

Section 301 of the Trade Act empowers the executive branch to respond to unfair policies and practices of foreign governments with measures such as imposing tariffs.

The U.S. administration of Donald Trump imposed an "global tariff" of 10% on trade partners worldwide on February 20 under Section 122 of the Trade Act, following the Supreme Court's ruling on reciprocal tariffs.

The Trump administration intends to fill the tariff gap with the temporary global tariff, introduced as a stopgap measure, until a new tariff system that replaces the existing reciprocal tariffs based on the Section 301 investigation is formally established.

As the period for imposing the global tariff is 150 days and expires on July 24, the Trump administration is rushing to introduce replacement tariffs under Section 301 before then.

South Korea had previously lowered the U.S.'s announced 25% reciprocal tariff to 15% after promising a total of $350 billion in investments to the U.S. through tariff negotiations last year. Currently, like other countries, it is subject to a temporary 10% global tariff.

Regarding the measures proposed based on the results of the 'forced labor' investigation, the USTR plans to finalize their implementation after gathering opinions, including through a hearing scheduled for the 7th of next month.

In a statement, USTR Representative James Greer said, "It is unacceptable that our important trade partners have not resolved the issue of importing products made with forced labor, which forces American workers to compete on an uneven playing field globally. We will no longer tolerate such imbalances."

If the additional 12.5% tariff based on the forced labor investigation is confirmed, it will be close to the existing 15% reciprocal tariff, which was determined through consultations between South Korea and the U.S.

In addition to the forced labor investigation concluded this time, the U.S. plans to release plans for additional tariffs through the 'overproduction' related investigation.

For example, if South Korea has to pay an additional 5% tariff due to overproduction issues, the total reciprocal tariff applied to South Korea under the U.S. Trade Act Section 301 would become 17.5% (12.5% + 5%), which is higher than the existing 15% reciprocal tariff.

Therefore, considering the trade agreement reached between South Korea and the U.S. based on the large-scale investment pledge to the U.S., the South Korean government is communicating with the U.S. government with the basic stance that the total additional tariffs to be introduced by the U.S. through Section 301 of the Trade Act should not exceed 15%.

Kim Jeong-kwan, Minister of Trade, Industry and Energy, recently told reporters that regarding the Section 301 investigation that the U.S. is conducting against South Korea and others, "We understand that the purpose is to restore the 15% reciprocal tariff (which was ruled illegal)." He added, "I believe the U.S. measures based on the investigation results will be within that scope. We will do our best to ensure it stays within that scope."