Countdown to Mutual Tariffs Featuring the 'Hwanggeumryul' Principle... Will Cars and Pharmaceuticals Be Excluded?

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As the United States announced it would impose "reciprocal tariffs" on countries worldwide as early as the 12th (local time), countries with large trade surpluses with the U.S., including South Korea, are growing anxious. Although there is speculation that South Korea may be less affected due to its Free Trade Agreement (FTA) with the U.S., there is precedent where the existing quota system, a prior agreement between South Korea and the U.S., became ineffective after the U.S. applied a 25% tariff on steel and aluminum imports "without exception." However, there is growing hope as some sectors, including automobiles?South Korea's top export item?and pharmaceuticals, may be exempt from the reciprocal tariffs.

U.S. President Donald Trump, when asked by reporters at the swearing-in ceremony of National Intelligence Director Tulsi Gabbard whether he would sign the executive order imposing reciprocal tariffs, said, "I might sign it shortly, or I might do it tomorrow morning." President Trump stated, "The world has long taken advantage of the United States," adding, "They imposed huge tariffs on us, but we did not impose tariffs on them." Regarding the reciprocal tariff measure, he emphasized, "We impose tariffs as much as they impose on us. It's a very simple principle."

White House Press Secretary Caroline Levitt also said during a briefing, "We believe the reciprocal tariff policy will be announced before Indian Prime Minister Narendra Modi's visit on the 13th (local time)," adding, "The president will discuss the details of the reciprocal tariffs personally, but this is an issue President Trump holds strong convictions about." Levitt justified the reciprocal tariff measure by citing the "Golden Rule" from the Bible, stating, "The reason for imposing reciprocal tariffs is based on very simple logic." The Golden Rule refers to Matthew 7:12: "So in everything, do to others what you would have them do to you."

In South Korea's case, most traded goods are tariff-free due to the FTA with the U.S. This means that even if reciprocal tariffs are implemented, South Korea may be relatively less affected. According to the U.S. Department of Commerce's International Trade Administration (ITA), China recorded the largest U.S. goods trade deficit in 2024 at $295.4 billion. South Korea ranked eighth with $66 billion. From South Korea's perspective, this indicates a significant trade surplus.

However, President Trump’s statement that there would be "no exceptions" to the 25% universal tariffs on steel and aluminum, effective from the 4th of next month (local time), caused upheaval in the domestic industry. It is still too early to be reassured. During Trump’s first term, South Korea negotiated with the U.S. to be exempted from steel tariffs in exchange for accepting a quota system limiting export volumes, currently applying a "2.63 million tons tariff-free" quota.

There is also some expectation that certain sectors, such as automobiles and pharmaceuticals, may be excluded from future reciprocal tariff applications. An anonymous source told Reuters on the same day that during a meeting with Republican House members on the 6th, President Trump was considering exempting reciprocal tariffs in four sectors, including automobiles and pharmaceuticals. Mike Johnson, Speaker of the U.S. House of Representatives and a Republican, also mentioned the possibility that automobiles and pharmaceuticals could be exceptions in the reciprocal tariff policy.

Last year, South Korea’s automobile exports to the U.S. amounted to $34.7 billion (approximately 50 trillion won), and semiconductors reached $10.7 billion, totaling over 65 trillion won combined, accounting for more than one-third of total exports to the U.S. Automobiles are the top single export item in terms of total export value. Jim Farley, CEO of U.S. automaker Ford, recently argued for imposing tariffs on Korean cars, stating, "Hyundai and Kia are effectively selling cars without tariffs." President Trump also identified automobile trade as the top priority for reciprocal tariffs.

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