Tariffs on Korean Imports: Implications for U.S. Manufacturing and Investment

Since the Donald Trump administration took office in 2025, the United States has imposed a broad range of tariffs to advance national security, strengthen supply-chain resilience, and address perceived unfair trade practices by major trading partners. Despite their different rationales, these measures are meant to strengthen U.S. manufacturing and encourage investment in strategic industries. However, significant tariffs continue to apply to intermediate goods and capital equipment that are essential to U.S. manufacturing investment. The adverse effects of tariffs currently imposed on imports from South Korea—a country that has made and continues to make substantial investments in the United States—showcase how tariff policies can support, rather than inadvertently constrain, U.S. manufacturing and investment.

Current Status of U.S. Tariff Measures

A few years ago, determining the applicable tariff rate for a U.S. import from a particular country was relatively straightforward. Today, however, even trade and customs experts can find it difficult to track the rapidly changing tariff landscape, with rates varying by product, country, and, in some cases, even by company. Chapter 99 of the U.S. Harmonized Tariff Schedule (HTSUS), which was originally designed to accommodate temporary tariff modifications, has become an increasingly complex and permanent feature of the U.S. tariff system.

With the previous tariffs imposed under the International Emergency Economic Powers Act (IEEPA) and Section 122 of the Trade Act of 1974 now replaced by new tariffs under Section 301 addressing forced-labor policy, the current U.S. tariff regime can broadly be characterized by two principal categories: product-specific tariffs imposed under Section 232 of the Trade Expansion Act of 1962 (Section 232) and country-specific tariffs imposed under Section 301 of the Trade Act of 1974 (Section 301).

Country-Specific Measures Under Section 301

On July 23, 2026, the Office of the United States Trade Representative (USTR) announced tariffs on sixty economies, following Section 301 investigations into the failure of these economies to prohibit and effectively enforce a ban on imports of goods produced with forced labor. Unlike the previous tariffs imposed under IEEPA and Section 122, which applied to more than 200 U.S. trading partners, these new Section 301 tariffs cover 86 countries, with each European Union member state counted separately, accounting for 99.3 percent of total U.S. imports in 2025, as illustrated in Figure 1.

Figure 2 shows how four different tariff categories apply under the Section 301 action on forced-labor policy: 10 percent and 12.5 percent, each applied either in addition to the most-favored-nation (MFN) tariff or net of it. An MFN tariff is the non-discriminatory tariff rate a WTO member applies to imports from other WTO members. A 10 percent tariff applies to seventeen countries, including Canada, Mexico, India, Indonesia, and the United Kingdom, which together accounted for 36.6 percent of U.S. imports in 2025.

For imports from the European Union and Taiwan, “10 percent net of MFN” means the Section 301 tariff is applied together with the MFN tariff. If the applicable MFN tariff rate is less than 10 percent, the Section 301 tariff makes up the difference, bringing the combined tariff rate to 10 percent. For example, a product with a 2.5 percent MFN tariff would face an additional 7.5 percent Section 301 tariff, resulting in a combined rate of 10 percent. If the MFN rate is 10 percent or higher, no additional Section 301 tariff applies. For example, a product with a 15 percent MFN tariff would have a zero Section 301 tariff and, thus, be subject only to the 15 percent MFN tariff. The European Union and Taiwan accounted for 18.5 percent and 5.9 percent of U.S. imports in 2025, respectively.

Similarly, a 12.5 percent tariff applies, net of MFN, to imports from Korea, Japan, and Switzerland, which together accounted for 11.1 percent of U.S. imports. The remaining thirty-eight countries are subject to a flat 12.5 percent Section 301 tariff in addition to the MFN tariff. All other countries not subject to Section 301 tariffs remain subject to the U.S. MFN tariff rates, which average approximately 3.3 percent on a simple-average basis.  

USTR is likely to conclude a separate Section 301 investigation into structural overcapacity in industrial sectors across sixteen economies, encompassing forty-two countries including South Korea in the near future. Although any resulting tariff measures would take time to implement following USTR’s publication of a proposal based on its findings, the investigation could ultimately lead to additional tariffs on top of the existing Section 301 tariffs, further increasing the tariff burden on affected imports.

Table 1 shows the twenty largest U.S. trading partners by imports, which account for 84.8 percent of total U.S. imports in 2025, each facing different Section 301 tariff rates. It remains unclear whether the additional excess-capacity Section 301 measure would increase these rates to levels comparable to the country-specific IEEPA tariffs previously imposed by the Trump administration.

Immediately following the imposition of Section 301 tariffs, importers as well as a coalition of twenty-five Democratic state governments filed a lawsuit in the U.S. Court of International Trade (CIT) seeking to overturn the tariffs. A three-judge panel will hear the case, with oral arguments scheduled for September 30. Some trade experts expect the Trump administration to lose again, but the Section 301 tariffs are likely to remain in effect for some time, potentially until the Supreme Court reaches a final decision.

Sectoral Measures Under Section 232

Several sector-level tariffs are also in place and under investigation through Section 232 of the Trade Expansion Act of 1962. Since Section 232 was enacted more than six decades ago, it was rarely used to impose tariffs until the Trump administration-initiated Section 232 investigations into steel and aluminum in 2017, which led to import restrictions, including tariffs and quotas. The administration initiated several additional Section 232 investigations in other areas during its first term, but none resulted in tariff measures. Immediately after Trump began his second term, however, his administration began announcing Section 232 investigations across multiple industrial sectors, including semiconductors, critical minerals, and pharmaceuticals.

Tariffs are currently imposed under nine Section 232 measures covering steel, aluminum, copper, automobiles, timber and lumber, medium- and heavy-duty vehicles (MHDVs), advanced computing chips,  pharmaceuticals, and unmanned aircraft systems. For two additional Section 232 investigations—processed critical minerals and commercial aircraft—the U.S. government has decided to continue negotiations with trading partners rather than immediately impose tariffs.  The administration also issued a decision on polysilicon and its derivatives , although the resulting tariffs have not yet taken effect. In addition, four Section 232 investigations covering wind turbines, robotics and industrial machinery, personal protective equipment, and anthracite coal are currently underway.

Tariffs on Korean Imports

Korea was the ninth-largest source of U.S. imports in 2025, and Korean companies have made substantial investments across a wide range of industries in the United States. As a result, higher U.S. tariffs have sharply impacted Korea, especially because most Korean exports to the United States had previously benefited from preferential treatment under the U.S.-Korea Free Trade Agreement (KORUS FTA).

Following months of negotiations, the United States and Korea reached the Korea Strategic Trade and Investment Deal in July 2025. After publishing a joint fact sheet on November 13, the U.S. government implemented the adjusted tariffs agreed upon by the two countries. The United States reduced its Section 232 sectoral tariffs on automobiles, auto parts, timber, lumber, and wood derivatives to 15 percent on an MFN-inclusive basis. It also agreed to apply a Section 232 tariff rate of no more than 15 percent on pharmaceuticals originating from Korea and to provide Korea with no less favorable terms with respect to semiconductors.

Consistent with the spirit of the 2025 trade deal between the two countries, the United States recently decided to apply a 15 percent tariff, net of MFN duties, to polysilicon and its derivatives, as well as unmanned aircraft systems and their components originating from Korea.

As illustrated in Table 3, most products from Korea are subject to a 12.5 percent tariff, net of MFN duties, under Section 301 on forced-labor practices. A 15 percent tariff, net of MFN duties, under Section 232 on the automotive sector applies to 214 automobiles and auto parts based on 8-digit HTS codes. In addition, 866 metal products are subject to Section 232 tariffs of 50 percent, 25 percent, or 15 percent, net of MFN duties.

According to Annex II, which lists products excluded from the Section 301 tariffs on forced-labor practices, 1,907 products originating from Korea are subject to U.S. MFN tariff rates or preferential tariff rates under the KORUS FTA. However, the carveouts are narrowly defined, with more than 1,000 of the 1,907 products covered by only two exemption categories. These include articles used in pharmaceutical applications, accounting for 700 8-digit HTS codes, and articles of civil aircraft and their parts and components, accounting for 356 HTS codes. Therefore, products outside these narrowly defined carveouts remain subject to Section 301 tariffs rather than U.S. MFN or preferential tariff rates under the KORUS FTA.

Unlike the distribution of products by tariff category, Figure 3 presents a different picture of the impact of U.S. tariffs on imports from Korea when measured by import value. Based on U.S. import data for 2025, U.S. imports of Korean products subject to Section 232 tariffs on the automotive sector are valued at USD 44.7 billion, accounting for approximately 36 percent of total U.S. imports from Korea. U.S. imports of steel, aluminum, copper, and their extensive derivatives subject to Section 232 tariffs amount to approximately USD 17 billion, or roughly 14 percent of total imports.

In addition, approximately USD 26 billion of U.S. imports from Korea are subject to Section 301 tariffs. This figure could be higher when considering products covered by the carveouts for aircraft and pharmaceutical applications, which accounted for approximately USD 5.4 billion in U.S. imports from Korea. If Section 232 tariffs on unmanned aircraft systems and polysilicon take effect on September 3 and December 4, respectively, a portion of U.S. imports from Korea currently subject to U.S. MFN or preferential tariff rates under the KORUS FTA will face a 15 percent tariff, net of MFN duties.

Disaggregating U.S. imports from Korea by industry and tariff category, Table 4 shows that almost all imports of transport equipment face the 15 percent Section 232 tariff rate. It is also notable that the United States imposes Section 232 tariffs ranging from 15 to 50 percent on metal products, while Section 301 tariffs apply to most imports of metals and electrical appliances from Korea. Meanwhile, the majority of U.S. imports of information and communication technology (ICT) and computer products from Korea are not covered by either Section 301 tariffs or other Section 232 measures.

Tariffs on Investment-Generating Imports

Mapping tariff rates by product and country is difficult not only because of the number and complexity of the measures in place, but also because the U.S. government frequently adjusts them to account for inflation, production costs, and business realities. Most recently, it exempted from the Section 301 forced-labor tariffs products that could cause economy-wide disruptions or cannot be produced in sufficient quantities in the United States. However, these exemptions may be insufficient to create an investment-friendly environment in the United States.

Accordingly, if the ultimate objective of U.S. trade policy is to attract investment in domestic manufacturing, one solution could be to treat so-called investment-generating imports differently from other imports, particularly when they are essential inputs or capital equipment for U.S.-based production. Table 5 shows that U.S. imports of intermediate and capital goods from Korea remain subject to relatively high tariff rates, ranging from 12.5 to 50 percent, under Section 301 and Section 232 measures. Intermediate consumption refers to goods used as inputs in the production of other goods, while gross fixed capital formation includes machinery, equipment, and other assets used to establish or expand productive capacity.

Korean companies across a diverse range of sectors, including semiconductors, automobiles, batteries, critical minerals, steel, and robotics, have invested and plan to make additional investments in the United States. In particular, companies in the early stages of constructing their U.S. facilities often need to import high-value, specialized equipment that is not readily available from U.S. suppliers. Applying high tariffs to such equipment could increase the cost of establishing U.S. manufacturing capacity and potentially undermine the investment objectives of U.S. trade policy.

Policy Implications

Although U.S. tariff policy applies broadly, the U.S. government has accommodated exceptions in certain circumstances. Relevant agencies have engaged interested parties through public comment periods and hearings before making final recommendations to the president, and the scope of covered products has been amended or adjusted on various occasions after implementation. In addition, recent Section 232 measures have created incentives for companies to invest in U.S. production of products subject to the measures. But there is no official, transparent procedure by which both domestic and foreign companies that have invested in or plan to invest in U.S. production can request tariff relief.

For U.S. tariff policy to achieve its objective of encouraging investment in the United States, it should be sufficiently flexible to accommodate commercial realities and avoid inadvertently creating barriers to U.S. manufacturing or discouraging companies from making or expanding investments in domestic production.

Hyun Jung “Jessie” Je is Senior Fellow and Director for External Engagement at the Korea Economic Institute (KEI). The views expressed are the author’s alone.

This material is distributed by KEI on behalf of the Korea Institute for International Economic Policy. Additional information is available at the Department of Justice, Washington, DC.