U.S. President Donald Trump holds up an executive order while Commerce Secretary Howard Lutnick stands nearby in the Oval Office at the White House in Washington, Thursday. UPI-Yonhap

Time is running out for Korean industries seeking negotiations on the forthcoming U.S. tariffs, as U.S. President Donald Trump on Thursday (local time) declared that Washington's plan for implementing “reciprocal tariffs” on trading partners would take effect as early as April 1.

In response, the Korean government said the impact would likely be “limited due to the Korea-U.S. Free Trade Agreement (KORUS FTA).” However, fears continue to grow among businesses here as the United States said it would first investigate countries with large trade deficits, naming Korea as one example.

Trump said his administration will launch a country-by-country investigation to determine reciprocal tariffs, telling reporters that “whatever countries charge the United States of America, we will charge them. No more, no less.”

Commerce Secretary Howard Lutnick and the Office of the U.S. Trade Representative (USTR) are tasked to calculate duties to determine charges on countries and to counteract nontariff barriers. They are set to submit a report with proposed remedies by April 1.

“It doesn't matter whether it's strategic competitors like communist China, or allies like the European Union or Japan or Korea,” a senior White House official said at a press briefing. “Every one of those countries is taking advantage of us in different ways, and the president characterizes this as a lack of reciprocal trade.”

The official said the duties will likely take effect “very rapidly” after the investigation, but noted that countries can negotiate their way out of reciprocal tariffs, saying “the president is more than happy to lower tariffs if those countries want to lower tariffs.”

Cars are parked for export at a port near Hyundai Motor's plant in the southeastern port city of Ulsan, Tuesday. Yonhap

For Korea, which enjoyed a $55.7 billion trade surplus with the U.S. last year thanks to the KORUS FTA, the latest policy comes as a formidable risk, as Trump highlighted that nontariff barriers, such as value-added taxes (VATs), exchange rates and regulations, will be taken into account in calculating duties.

For nearly 50 years, Korea has been applying a standard VAT rate of 10 percent on most goods and services, while the U.S. employs a sales tax system with an average rate of 6.6 percent. The VAT is levied at multiple stages of production and distribution on domestic and international transactions, while sales tax is collected only at the final point of sale to the consumer.

Since VAT applies to all goods and services sold within a country, regardless of origin, a U.S. product imported into a country with VAT is subject to both VAT and tariffs, while a domestically produced similar product is only subject to VAT. Due to this structure, Trump labeled VAT “far more punitive than a tariff.”

A Korean government official said Friday that most tariffs between Korea and the U.S. were eliminated under the FTA, and “the price of Korean goods exported to the U.S. would rise by about 5 percent if Trump applies reciprocal tariffs to VAT.”

Along with VAT, the U.S. is expected to focus on various Korean policies and regulations that have been perceived as barriers to U.S. companies entering the Korean market.

In its 2024 National Trade Estimate report, the USTR cited ambiguous certification regulations for car exhaust parts, complex and inefficient approval procedures for genetically modified agricultural products and insufficient measures to protect intellectual properties, as barriers in trade with Korea.

Acting President Choi Sang-mok, right, speaks during a meeting on the Korean economy at Government Complex Seoul, Friday. Courtesy of Ministry of Economy and Finance

Also casting fears are Trump's threats on the Korean chip industry.

While announcing the reciprocal tariffs plan, Trump highlighted that he granted tariff relief to products that Apple produced in China because its rival Samsung Electronics, which exports its products to the U.S., was waivered from duties. However, he said, “now this applies to everybody across the board.”

A Reuters report said the White House was also looking to renegotiate the terms of semiconductor subsidies awarded under the CHIPS and Science Act and disbursements might be delayed as part of this process.

Under the subsidy program, Samsung is set to receive $4.75 billion in return for its investment and building a foundry plant in the U.S. state of Texas, worth over $37 billion. SK hynix is also scheduled to receive up to $458 million in subsidies for its advanced packaging facility for artificial intelligence memory chips in the state of Indiana.

Acting President Choi Sang-mok on Friday also emphasized the need for continued monitoring, although he said that the impact of reciprocal tariffs may not significantly affect Korea's economy given the FTA.