Insights

A new U.S. tariff measure has now targeted Korea on the grounds of “forced labor.” The Office of the United States Trade Representative announced final action following its Trade Act Section 301 investigation into forced-labor-related practices across 60 countries, launched in March 2026, and began imposing tariffs at 12:01 a.m. U.S. Eastern Time on July 24. Unlike previous Section 301 investigations focused on intellectual property and technology transfer, this is a separate investigation based on the “failure to adopt and enforce measures prohibiting imports of goods produced with forced labor.”

Korea is grouped with Japan and Switzerland, with an additional ad valorem rate set at 12.5%. Korea was classified among 54 countries that “failed to adopt and enforce a prohibition on forced-labor imports” and is subject to a “12.5% net of MFN” approach that brings the combined rate, including the most-favored-nation rate, to 12.5%. Products already subject to an MFN rate of 12.5% or higher incur no additional burden, while products below that level are charged only the difference. Product exemptions are limited to common exemptions such as aircraft parts, active pharmaceutical ingredients, and humanitarian donations under Annex I and raw materials and agricultural products under Annex II Part A. Korea does not qualify for the additional country-specific exemptions granted to 13 countries, including the United Kingdom and EU members.

Cumulative application is the rule, except for products already covered by Section 232. In principle, the new tariff is added to ordinary customs duties, Section 232 duties on derivative products, and IEEPA reciprocal tariffs. However, goods already covered by the Section 232 tariff framework—including steel, aluminum, automobiles and parts, lumber, and semiconductors—are excluded from duplicate application, while antidumping and countervailing duties continue to apply separately. KPMG recommends four responses: ① recheck product-level HTS codes and MFN rates and seek a CBP ruling where necessary; ② model exemption and differential-rate eligibility and use first-sale and transfer-pricing policies to reduce costs; ③ conduct a complete review of Annex II exemptions for raw-material and mineral processors; and ④ initiate IEEPA duty refunds proactively, as the refund rate remains around 20%.

Implications for M&A. First, structural tariff exposure may accelerate consideration of cross-border M&A to secure U.S. production bases, as well as greenfield and brownfield investment. Second, origin and tariff risks at companies with multinational supply chains are becoming core due diligence items, and tariff exposure is likely to feed directly into deal valuations. Third, processing and materials companies handling tariff-exempt raw materials and intermediate goods may become more attractive strategic acquisition targets because of their relative cost competitiveness.