U.S. Court Blocks 10% Tariff, Increasing Uncertainty for Korean Companies

"Global Tariff Ruled Unlawful"
Section 122 Requirements Not Met
USTR Initiates Section 301 Investigations
Industry Expects New Tariffs Announcement in Late July

On May 7 (local time), the U.S. Court of International Trade ruled that the "global 10% tariff" imposed by U.S. President Donald Trump as a replacement for the previously invalidated reciprocal tariffs was also illegal. As tariff-related uncertainty under the Trump administration grows once again, concerns are mounting among Korean companies doing business in the United States. Although the Trump administration has yet to issue an official statement, there is widespread speculation that it may appeal the decision and move to reimpose tariffs using Section 301 of the Trade Act.

10% Tariff Ruled Illegal

According to The New York Times (NYT) and other sources on the same day, the U.S. Court of International Trade (USCIT) ruled that President Trump's 10% "global tariff," which was imposed on imports from around the world, was unlawful. In a 2-1 decision, the three-judge panel determined that the global tariff did not meet statutory requirements. The court stated, "President Trump's proclamation is invalid, and the tariffs imposed on the plaintiffs are not legally permissible."

In February, President Trump responded to a Supreme Court decision that found his reciprocal tariffs, based on the International Emergency Economic Powers Act (IEEPA), illegal and invalid, by invoking Section 122 of the Trade Act to impose a 10% tariff. However, the court has now ruled that this, too, is illegal.

Section 122 allows the U.S. president to impose tariffs of up to 15% for a maximum of 150 days if the United States faces a serious "balance of payments deficit" or a sharp decline in the value of the dollar. Bloomberg reported that, although enacted in 1974, this provision has never actually been used.

In this ruling, the court determined that the Trump administration confused "balance of payments" with "trade deficit" when issuing the tariff order, and therefore did not meet the requirements to apply Section 122. The balance of payments is an economic indicator that measures all forms of economic transactions—including goods, services, income, transfers, and finance—between domestic residents and foreign counterparts. The trade deficit, however, is generally limited to goods transactions. President Trump had previously emphasized the need for tariffs, citing the U.S.'s $1.2 trillion goods trade deficit last year.

The court stated, "Congress designed this provision very narrowly to limit the president's discretion," adding, "(The current economic) situation is different from the international monetary crisis Congress had in mind when enacting the law."

Limited Impact Possible... Section 301 of the Trade Act May Gain Momentum

The court issued a permanent injunction prohibiting the Trump administration from applying the 10% global tariff to the plaintiff importers and ordered the administration to refund the duties already paid by the plaintiffs, with interest. However, the court rejected the request to apply the ban on the 10% global tariff universally, beyond the plaintiff companies.

Despite the ruling, an immediate refund is unlikely. The Trump administration is expected to seek review by higher courts and possibly the Supreme Court, in which case the effect of the initial ruling could be suspended. President Trump had previously strongly opposed the invalidation of the reciprocal tariffs.

President Trump is not expected to back down from his tariff policy. He is already preparing to use Section 301 of the Trade Act, known as "Plan C." Section 301 allows the U.S. to impose tariffs in response to unfair trade practices by other countries, and it served as the main legal basis for tariffs against China during the first Trump administration's U.S.-China trade war. Currently, the Office of the United States Trade Representative (USTR) is conducting Section 301 investigations on issues such as the distribution of products made with forced labor and global overproduction. Industry observers predict that a new tariff announcement could come at the end of July, when the global tariff period is set to expire. The NYT reported, "The Trump administration has regarded Section 122 tariffs as only a temporary measure from the outset," adding, "It was primarily a way to buy time before transitioning to a more sustainable high-rate tariff regime."

However, Korean companies operating in the United States are expected to face growing anxiety as they watch these developments. Samsung Electronics and LG Electronics are pursuing a dual strategy of expanding U.S. production and adjusting pricing. Hyundai Motor Group is also expanding its investment in the U.S. market. In this environment, if the tariff regime continues to change, these companies may have to repeatedly revise their plans for production locations, pricing policies, and supply chain adjustments.

This content was produced with the assistance of AI translation services.