Economists suggest that the longstanding free trade agreement between South Korea and the United States could be pivotal in mitigating the effects of potential reciprocal tariffs. This comes in response to US President Donald Trump's directive to his economics team to develop plans for imposing reciprocal tariffs on countries taxing US imports. The announcement has prompted South Korea to examine its trade policies closely, with the government pledging a thorough review of non-tariff barriers and vulnerabilities.
The KOSPI, South Korea's stock market index, reflected positive market confidence by rising nearly 3% this week, reaching its highest level since early November. This uptick in the market showcases investor optimism amid uncertainties surrounding international trade policies. South Korea, which has the second-highest tariff rates among the top 15 US trading partners, after India, could face new challenges if targeted by US tariffs.
The free trade pact initially signed between South Korea and the US in 2007 and revised in 2018 eliminated nearly all tariffs between the two nations. This agreement has kept South Korea's average tariff rate on imports from the US at a relatively low 0.79% as of 2024, with expectations for further reductions this year. Notably, there are no duties on manufactured goods imported from the US, highlighting the comprehensive nature of this trade relationship.
South Korea's acting president, Choi Sang-mok, addressed these developments by emphasizing the government's commitment to identifying key areas of US interest and preparing detailed explanations concerning South Korea's non-tariff barriers.
"The impact of the reciprocal tariff measures may not be huge on our economy, as tariff rates are low due to the Korea-US Free Trade Agreement." – Choi Sang-mok, the finance minister who is serving as acting president.
In a trilateral meeting on the sidelines of the IMF/G20 meetings at the US Treasury in Washington, US Treasury Secretary Janet Yellen and Japanese Finance Minister Shunichi Suzuki joined Korean Finance Minister Choi Sang-mok. This gathering aimed to foster dialogue and cooperation amid evolving global economic dynamics.
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