United States President Donald Trump addresses a joint session of Congress at the U.S. Capitol in Washington, Tuesday (local time). Reuters-Yonhap

The Korean government refuted Wednesday United States President Donald Trump's remarks that South Korea's average tariff is four times higher than that of the U.S., saying it will explain to the U.S. side that the claim is not true.

The response followed Trump's speech to U.S. Congress on Tuesday (local time), in which he said, "South Korea's average tariff is four times higher. Think of that ... four times higher, and we give so much help militarily and so many other ways to South Korea. But that's what happens. This is happening by friend and foe."

The trade ministry said after the speech that it would address the inaccuracies.

“We'll officially explain to the U.S. government via the Korean Embassy in the U.S. and various channels that [Trump's] tariff ratio comments were not accurate,” it said in a release.

According to the ministry, Korea's average most-favored nation (MFN) tariff rate is 13.4 percent, which is approximately four times higher than the 3.3 percent of the U.S. However, tariffs imposed for U.S. imports are almost at zero, as the two nations have a free trade agreement (FTA).

The MFN-applied tariff is a trade term under the World Trade Organization's principle, which requires countries to treat all other members equally in trade agreements. However, it applies only to trade between countries without a bilateral trade agreement. Therefore, a direct comparison of two countries' MFN tariffs can be misleading, according to the ministry.

“To resolve the misunderstanding, we'll explain that there's almost no tariffs imposed on the U.S. [products] via the embassy, various working-level channels we recently formed and the trade minister who is scheduled to visit the U.S.," the ministry said.

In his speech, Trump also wielded a stick for Korean chipmakers by threatening to kill the CHIPS and Science Act, which grants up to billions of dollars of subsidies for Samsung Electronics and SK hynix.

On the other hand, he extended offers for Korean firms' partnerships in a natural gas project in Alaska, stoking rosy prospects for companies dealing with fossil fuels.

The president called the CHIPS Act “a horrible, horrible thing,” urging Congress to “get rid of the CHIPS Act," and telling the speaker of the House that "whatever's left over” can be used “to reduce debt — or for any other reason you want.”

The CHIPS Act was signed by his predecessor Joe Biden in August 2022, allocating a total of $52.7 billion in subsidies to companies that establish manufacturing facilities in the U.S.

Under the CHIPS Act, Samsung Electronics pledged to invest $37 billion in the U.S., including a chip manufacturing complex in Texas. SK hynix also committed to investing $3.87 billion in Indiana. In the final weeks of the Biden administration, Samsung Electronics and SK hynix confirmed $4.745 billion and $458 million respectively in subsidies.

Since his campaign, Trump has been escalating his criticisms that the law is ineffective in drawing foreign chipmakers' investments and creating jobs in the U.S., arguing that tariffs are more effective.

The construction site of Samsung Electronics' chip plant is seen in Taylor, Texas, Feb. 14. Courtesy of Samsung Electronics

Tuesday's speech is Trump's strongest rhetoric against the CHIPS Act to date. Since it is a federal law, repealing it requires congressional approval or other legislative actions. However, the White House is taking administrative steps to reduce the program's scope.

Both Samsung Electronics and SK hynix declined to comment on Trump's latest remarks, but industry officials said that pressure is ever growing for Korea's top two chipmakers to invest more in the U.S.

“Since the inauguration of the Trump administration, pressures are only escalating for more investments in the U.S.,” an industry official said on condition of anonymity.

“Looking at recent cases like TSMC's massive investment into the U.S., and the precedents of Trump's negotiations, it seems that his ultimate goal may not be that extreme, but he is applying strong pressure to secure something in the middle ground … And this will likely force chipmakers to consider alternatives to meet his demands, ultimately.”

On Monday, TSMC announced its plan to invest $100 billion to build advanced chip production facilities in the U.S.

“The chip industry here has no option but to wait and see, because there are no concrete details or clues on how the current pressure will unfold into actual barriers,” another industry official said. “But what's clear for now is that Korean chip businesses cannot give up their U.S. business, and you can assume that there are ongoing under-the-table efforts to find the middle ground that can satisfy the U.S. administration.”

This undated file photo shows the Trans-Alaska pipeline and pump station. AP-Yonhap

Gas in Alaska

During the address to Congress, Trump mentioned Korea and Japan “want to be our (U.S.) partners of a gigantic natural gas pipeline in Alaska,” emphasizing the “trillions of dollars being spent by them.”

The Alaska natural gas development project is considered a key initiative for Trump and a potential area for collaboration between Korea and the U.S., potentially mitigating Washington's complaints on its trade deficit with Seoul.

On Tuesday, Seoul's Minister of Trade, Industry and Energy Ahn Duk-geun told reporters that “importing energy can be an effective tool” in negotiations related to U.S. tariff pressures. Korea imports its largest volume of liquefied natural gas from the U.S.

The remarks stoked positive outlooks on Korea's gas industry, pushing Korea Gas Corp.'s share price on Wednesday up 12.8 percent from a day earlier. Energy trader POSCO International also enjoyed a 15.31 percent surge in its share price after the remarks.

Industry officials said that the remarks are positive, but talks for the Alaskan gas project are still at an early stage.

“We also have a positive view on the Alaskan project, but it is too early to talk about any concrete things about the project,” a ministry spokesperson told The Korea Times. “A consulting body will be established for further discussions.”

A Korea Gas Corp. official said that the Alaskan project will play its role in diversifying sources for energy imports, but any benefits will likely be determined depending on energy prices at the time of signing actual import deals.

Their cautious stance is in line with doubts surrounding the economic viability of the Alaskan project.

In the early 2010s, major developers tapped into the Alaskan gas project, but it has been repeatedly suspended and resumed. An energy industry official said that constructing a pipeline across Alaska incurs huge expenses, and the costs of building LNG terminals and transporting the gas are also on the rise.