The U.S. Supreme Court has concluded its deliberations on the legality of Donald Trump’s administration’s tariff policies, leaving South Korean businesses to navigate complex implications. Regardless of the outcome, the Trump administration is likely to announce additional tariff measures, intensifying short-term uncertainty.
A Matter of Survival: Trump’s Tariffs Face Crucial Test
On Thursday, industry sources reported that the Supreme Court held a hearing at its Washington, D.C. headquarters on Wednesday. For two and a half hours, the Court examined the legality of President Trump’s tariff impositions, including reciprocal tariffs. A final decision is expected by year-end or early next year at the latest.
The central issue is whether tariffs imposed under the International Emergency Economic Powers Act (IEEPA) were lawful. Enacted in 1977, the IEEPA empowers the President to declare a national emergency and regulate economic transactions with foreign countries when faced with an unusual and extraordinary threat to U.S. national security, foreign policy, or economy.
Shortly after taking office, President Trump used the IEEPA to impose universal reciprocal tariffs and fentanyl-related tariffs on South Korea and other nations. Both the U.S. Court of International Trade and the Federal Court of Appeals ruled in favor of the plaintiffs, including Democratic-affiliated state governments and small businesses, stating that the IEEPA does not grant the President unlimited tariff-imposing authority.
With a 6-3 conservative majority, the Supreme Court’s composition is seen as potentially favorable to the Trump administration. However, these justices have expressed skepticism about the tariff policies, making the outcome uncertain. Prior to the Supreme Court hearing, the Trump administration dramatically framed the issue as a matter of national survival.
Trade Expansion Act Excluded from Review; Trump Mulls Plan B
While South Korean companies might hope for a Trump defeat, the situation is more nuanced. The tariffs acting as shackles on domestic industries like automobiles, steel, aluminum, electronics, and semiconductors are primarily item-specific tariffs based on the Trade Expansion Act. Notably, the Trade Expansion Act is entirely excluded from the Supreme Court’s review.
A Trump loss could lead to retroactive refunds of the reciprocal tariffs (15%) imposed on South Korean companies exporting to the U.S. However, since reciprocal and item-specific tariffs cannot be simultaneously imposed, refunds would likely be limited to consumer goods and electronics sectors (excluding steel-derived tariffs).
In response, the Trump administration is likely to invoke either Section 122 of the Trade Act or Section 232 of the Trade Expansion Act as a Plan B. This could involve offsetting potential tariff refunds with new item-specific tariffs or even increasing existing tariff rates.
Kim Sung-keun, a senior analyst at Mirae Asset Securities, notes that a Trump loss would necessitate refunding tariffs collected under the IEEPA. As of August, IEEPA-related imports totaled approximately 90 billion USD, representing about 41% of total tariff revenue (196 billion USD).
Midterm Elections Loom: Will Angry Voters Rein in Trump?
The sentiment of American voters remains a critical factor. Trump’s approval ratings have plummeted due to the negative impacts of his tariff policies. Analysts suggest that with next year’s midterm elections approaching – a crucial determinant for his second-term agenda – Trump may be hesitant to push for additional tariff measures.
As tariffs contribute to rising U.S. prices, support for the administration’s tariff policies has plunged to a historic low of 33%. In a notable development, Democratic Muslim candidate Zoran Mamdani won a seat in the New York State Assembly during the New York City mayoral election.
Han Joo-hee, a researcher at the Korea Trade Association, emphasizes that item-specific tariffs directly affecting South Korean companies – such as those on steel, aluminum, automobiles, copper, and semiconductors – are entirely separate from the Supreme Court’s ruling. She notes that Section 232 of the Trade Expansion Act, which was also used to impose tariffs during Trump’s first term, will likely remain unaffected by an unfavorable ruling.
However, the researcher cautions that given President Trump’s hardline stance on tariffs, additional levies remain possible. She warns that any new tariffs would inevitably impact macroeconomic factors, potentially driving U.S. prices even higher.