Executive Summary
The second Trump administration, citing the protection of strategic industries and
reduction of the trade deficit, announced a 10% universal tariff on all goods and
signaled the imposition of reciprocal tariffs on 57 countries, including South Korea.
After a grace period, reciprocal tariffs are scheduled to be imposed on 69 countries—
including South Korea—starting August 7, 2025.
Software, being intangible and electronically transmitted, is generally exempt
from customs declarations and tariffs. Electronically delivered software remains
untaxed, and software stored on physical media is effectively tariff-free due to
low or zero tariff rates on the media itself. However, license fees linked to
embedded or media-based software could become taxable if directly tied to
export contracts. Thus, electronically transmitted and media-based software are
expected to remain relatively safe under the current regime. In contrast, software
embedded in hardware (e.g., auto parts, marine equipment, and home appliances)
may be subject to tariffs, as their value is bundled with the hardware. Such cases
may face reciprocal or additional tariffs, and require close monitoring.
Indirect effects of high hardware tariffs may include increased operating costs
for SW firms, reduced infrastructure investment, and constrained IT budgets
among customers. However, this uncertainty could also drive demand for
AI-based automation and strategic digital solutions, presenting new opportunities
for global SW providers.
In conclusion, while the SW industry may largely avoid direct tariff risks,
embedded software in specific hardware categories could be vulnerable. The Korean
government should consider a negotiation strategy that seeks tariff exemption for
embedded software through customs negotiations with the United States, or
incorporating digital trade provisions into bilateral or FTA negotiations to ensure
broader recognition and protection of software under future trade frameworks.