[The Editors' Verdict] Who Bears the Burden of Trump's Tariff Surcharges?

Since the inauguration of the Donald Trump administration in the United States this January, "tariff" has become a popular search term on YouTube. As the U.S. began imposing tariff surcharges of over 25% on countries worldwide, global interest has naturally followed. Among the many videos, one that recently caught attention focused on the question, "Who actually pays the tariffs?" In a video titled "The secret behind who pays the tariffs revealed!", an American reporter interviewed a Trump supporter on the street, asking who pays the tariffs. The supporter answered, "The Chinese government." At that point, an expert accompanying the reporter stepped in to clarify that this was not the case. Introducing himself as someone with over 20 years of experience in import and export, the expert explained, "U.S. importers pay the tariffs in accordance with U.S. government regulations." He added that these costs are reflected in the sale price to recoup the tariff expenses. This video has recently surpassed 21 million views.

As the expert explained, it is generally the importer who bears the burden of tariffs. However, does this conventional wisdom hold true in reality?

A CEO of a major corporation I spoke with recently shook his head and said, "That's not the case." This company, which sells electrical equipment to the U.S., has faced new concerns about tariff burdens since the Trump administration took office. Under the typical structure, the local U.S. buyer importing the company's products would be expected to bear the tariff costs. However, buyers are also struggling with the 10% universal tariff that began in April. The CEO said, "What makes the Trump tariff surcharges so daunting is not only their impact on product prices, but also the question of who will shoulder the burden." The company is currently considering arrangements where the tariff is split equally with the buyer or fully absorbed by the company itself.

It is not entirely new for exporters to bear the tariff burden. There is a trade term known as DDP (Duty Delivered Paid), under which the exporting company covers all taxes incurred in the importing country, including shipping and tariffs. For buyers, this offers the advantage of not having to worry about additional costs during the import process and greatly simplifies procedures. However, when tariff rates are unstable, the burden on exporters increases. In particular, with the possibility that the currently suspended 25% reciprocal tariffs could be enforced after July, it becomes increasingly uncertain for exporters to take on the full tariff burden. The CEO of the electrical equipment company also stated, "We have to negotiate contracts with big tech companies in the second half of the year, and figuring out how to handle the tariffs is a major challenge."

For now, these concerns remain beneath the surface. Since higher tariffs are likely to raise the price of products in the U.S. market, there is still room to pass the increased costs on to prices.

However, as competition intensifies in the U.S. market, the situation changes. If tariff rates are applied differently by country, companies must inevitably consider their price competitiveness. Additionally, the reality that Korean manufacturers, who are squeezed by Chinese products in global markets, can remain competitive in the U.S. market may actually weaken the export bargaining power of individual companies. A former trade official commented, "The U.S. is artificially blocking Chinese products, which is what allows our products to be competitive in the local market." There is also a growing possibility that, using the barrier against Chinese products as justification, U.S. authorities may demand that Korean companies shoulder the tariff burden.

Recently, the U.S. reached a trade agreement with the United Kingdom to lower automobile tariffs to 10% and to eliminate tariffs on steel and aluminum. This marks the first trade agreement since the Trump administration. Ongoing trade negotiations with other countries are also expected to accelerate. Companies must now prepare for the contradictory challenges of "tariff burdens" and "strengthening price competitiveness."