The U.S. Supreme Court is expected to deliver its final verdict on Friday regarding the legality of President Donald Trump’s reciprocal tariffs, imposed under the International Emergency Economic Powers Act (IEEPA). Experts caution that if the court deems these tariffs unlawful, it could inject greater uncertainty into the trade agreement between the U.S. and South Korea.
Victor Cha, the Korea Chair at the Center for Strategic and International Studies (CSIS), outlined the potential consequences in a newsletter titled, Supreme Court Ruling and Korea, on Thursday. He suggested that while a ruling against the tariffs might provide South Korean companies with substantial short-term gains through tariff refunds, it could ultimately undermine the foundation of the U.S.-South Korea trade agreement, leading to increased long-term uncertainty.
Cha noted that the Supreme Court’s decision could potentially reduce the current 15% reciprocal tariff on South Korea to zero. This development raises questions about the other provisions outlined in the U.S.-South Korea agreement fact sheet.
He further predicted that should President Trump attempt to maintain tariffs through alternative means, it would introduce greater uncertainty into the hard-won agreements that provided some measure of stability to the alliance under the Lee Jae Myung administration.
Analysts anticipate that even if the legal basis for the tariffs is invalidated, the Trump administration is unlikely to abandon its protectionist stance.
Cha cautioned that the Lee administration may face domestic pressure to withdraw from the agreement. However, such a move could jeopardize other valuable aspects of the deal, including provisions related to shipbuilding and nuclear submarines.
From the U.S. perspective, Cha assessed that the tariffs served as a highly effective negotiating tool, helping to secure approximately 350 billion USD in investments.
He explained that significant non-tariff concessions made by South Korea in areas such as automobiles (lifting export volume restrictions), digital trade (prohibiting data localization), agriculture (U.S. beef and cheese imports), and pharmaceuticals (drug pricing and patents) could also be at risk due to this ruling.
Cha specifically identified the South Korean companies most likely to be affected by this ruling: Hyundai Motor Group and its parts suppliers in the automotive sector, Samsung Electronics and SK in the electronics industry, and LG, Lotte, Kumho Petrochemical, and Hanwha Solutions in the chemical sector.
He stated that if the court rules against the reciprocal tariffs, the U.S. government may be obligated to refund up to 150 billion USD collected from over 300,000 companies. South Korean firms could potentially demand refunds for all tariffs paid since February 2025.
Cha suggested that the Trump administration might invoke Section 338 of the Tariff Act of 1930 as a means to maintain tariffs. This provision grants the president broad authority to impose tariffs of up to 50% on countries engaged in unfairly discriminatory trade practices, without requiring federal agency investigations, unlike Sections 232 and 301 of the Trade Expansion Act.
However, Cha cautioned that no previous administration has ever utilized this provision, and its application would almost certainly lead to legal challenges.