[Insight & Opinion] U.S. Ruling Voids Reciprocal Tariffs: Implications and Responses for K-Batteries

Supply Chain Diversification and Localization Must Continue
Legal Support System for Refund Lawsuits Is Urgently Needed

Park Taesung, Executive Vice President (Full-time) at Korea Battery Industry Association

On February 20, the U.S. Supreme Court ruled that President Donald Trump's reciprocal tariffs based on the International Emergency Economic Powers Act (IEEPA) were unlawful. This is highly significant as it marks the first case in which the judiciary has put a brake on the administration's exercise of emergency trade authority.

Immediately after the ruling, President Trump announced that he would invoke Section 122 of the Trade Act of 1974 to impose a 10% "global tariff" on imports from around the world and then raise it to 15%. Once the legal basis for IEEPA-based tariffs was lost, he activated a "Plan B" to secure policy continuity by using Section 122, which is a temporary tool.

Section 122 of the Trade Act allows tariffs of up to 15% to be imposed for 150 days under the pretext of defending the balance of payments. Although this ruling has put the brakes on tariffs imposed under IEEPA, it does not mean that the administration’s tariff tools have disappeared. On the contrary, the center of gravity in trade policy is shifting toward Section 232 of the Trade Expansion Act (national security) and Section 301 of the Trade Act (unfair trade). Republican leaders in Congress are even raising the possibility of legislating tariffs through the budget reconciliation process, further amplifying uncertainty in the trade environment.

For Korea, the impact of tariffs under Section 122 of the Trade Act (15%) is limited because a 15% reciprocal tariff has already been agreed upon through Korea-U.S. trade negotiations. However, the possibility of expanded application of Section 301 investigations and Section 232 of the Trade Expansion Act remains. Currently, electric vehicles and batteries are subject to the 25% tariff under the automotive Section 232, and battery materials are under investigation pursuant to the critical minerals Section 232.

It is also important to note that U.S. tariff policy is evolving beyond revenue collection into a tool for pressuring the localization of investment and production and the restructuring of supply chains. Accordingly, it is important for the government and companies to calmly and strategically manage the heightened trade risks related to the United States.

First, it is urgent to faithfully implement Korea-U.S. trade agreements and build trust. Japan is building trust by sticking to its investment plans regardless of the ruling. Korea must also implement the agreed road map, including the enactment of a special law on investment in the United States, without delay so that key export items such as automobiles, semiconductors, and batteries are not included in additional measures. The battery industry should solidify its local production systems and increase the localization ratio at the materials and minerals stages to structurally mitigate risks.

Second, a detailed analysis is needed of both the risks and the opportunities related to China. Last year in the United States, the market share of Chinese products plunged from 13.4% to 9%, leading to a decrease of about 130.4 billion dollars in imports of Chinese products and a shift in supply chains.

Chinese batteries are subject to a separate 25% tariff under Section 301 of the Trade Act, and in conjunction with the restructuring of supply chains away from China, this has provided Korean battery companies with opportunities to win large-scale energy storage system (ESS) orders in the United States.

However, variables such as the invalidation of IEEPA tariffs and the U.S.-China summit could weaken these windfall gains, making it necessary to continue efforts toward supply chain diversification and localization.

Third, a legal support framework must be established in preparation for future lawsuits seeking tariff refunds. As U.S. guidelines are not yet in place and lawsuits are expected to take years, most companies are taking a wait-and-see approach. Information sharing and legal advisory support are needed so that small and medium-sized enterprises are not left behind.

This ruling does not signify the end of protectionism but rather a "change in the method" of tariff policy. U.S. industrial policy is still based on America First principles. For K-batteries to maintain their global leadership, they must elevate their trade response capabilities to the highest level, alongside technological innovation. Trade capability is industrial competitiveness.

Park Taesung, Executive Vice President (Full-time) at Korea Battery Industry Association