Higher tariffs to hit S. Korea's companies

The United States has begun imposing item-specific tariffs on steel — and aluminum-derived products from Monday, which is expected to significantly affect South Korean companies and US consumers.

The additional tariffs, which have been increased to 50 percent, will eventually result in rising prices in the US as South Korean brands hold a significant share of the US home appliance market, said analysts.

Starting from Monday, the US has classified a range of home appliances, including refrigerators and washing machines, as well as steel and aluminum-derived products and has begun imposing item-specific tariffs, the Korea Customs Service, the national customs authority of South Korea, said on Wednesday, as reported by Chosunbiz.

Goods that have been categorized as "Made in Korea" under the two countries' free trade agreement may be classified as "made in a third country" and subject to high tariffs, the report said.

The US initially announced an additional 25 percent tariff on steel and aluminum products in March and doubled the rate to 50 percent in early June. The tariff on steel-derived products has also been increased to 50 percent.

The quantum of tariffs depends on how much steel and aluminum the items contain.

"Additional tariffs on appliances are not going to do (South) Korea much good and it may mean shocks to specific companies," Yang Jun-sok, an economics professor at the Catholic University of Korea in Seoul, told China Daily.

Increased prices

But US consumers are also expected to face increased prices as a result of the tariffs, according to Yang.

He noted that in 2018, the US slapped "safeguard" tariffs on South Korean washing machines due to antidumping concerns. The move failed to limit exports to the US, and US consumers ended up bearing between 125 percent and 225 percent of the cost of the washing machine tariffs, said Yang.

While South Korea's exports of home appliances to the US will be cut, Yang said he expects exports to other countries to continue.

In addition, although major South Korean home appliance companies such as LG and Samsung are exploring US production to mitigate tariff impacts, relocating their manufacturing is unlikely to prevent price hikes for US consumers, said Yang.

"The fact is that the cost of production is significantly higher in the US," said Yang, noting production in the US will not be profitable unless tariffs continue for years, which would also mean permanent higher prices for US consumers.

Both Samsung and LG hold a significant share of the US home appliance market, taking the top spots in the washing machine and refrigerator markets in 2024, according to South Korea's WOW TV, an affiliate of the Korea Economic Daily business newspaper.

If the full tariff cost is passed on to consumers, the price of a refrigerator could increase by up to 35 percent, the report said. It added that shifting refrigerator production to existing washing machine plants in the US or building new refrigerator factories in the US lacks feasibility.

South Korea is currently holding trade negotiations with the US, aiming to reach a deal before the July 8 deadline, when the 90-day suspension of the US administration's "reciprocal" tariffs will end. Earlier this week, new Trade Minister Yeo Han-koo held tariff talks with his US counterpart in Washington.

Under the US tariff scheme, South Korea is subject to 25 percent "reciprocal" tariffs on its shipments to the US, as well as sectoral tariffs on items such as automobiles and steel.

In May, South Korea's steel shipments to the US fell 16.3 percent to $327 million from $390 million a year earlier, according to Yonhap News Agency, citing data from the Korea International Trade Association.

kelly@chinadailyapac.com