Seoul — The US on Monday agreed to exempt South Korea from steel tariffs, instead imposing a quota on steel imports as the two countries agreed in principle to revise a trade pact sharply criticised by US President Donald Trump.
In return, South Korea said it would improve access for US car makers under the bilateral free trade deal known as Korus, the country’s trade ministry said.
In April, Trump told Reuters he would either renegotiate or terminate what he called a "horrible" trade deal that has doubled the US goods trade deficit with South Korea since 2012.
The agreement means South Korea becomes the first US ally to receive an indefinite exemption, albeit with a quota, on steel tariffs imposed by Trump.
Trump’s action on steel and aluminium, along with plans to slap tariffs on up to $60bn in Chinese goods had fuelled the concern of a damaging global trade war.
"We had heated discussions," South Korean Trade Minister Kim Hyun-chong said at a media briefing in Seoul. "The latest agreement removed two uncertainties," he said, referring to steel tariff exemptions and Korus renegotiation.
Last week, Trump temporarily excluded six trade partners, including Canada and Mexico, Australia and the EU from higher US import duties on steel and aluminium which came into effect on Friday.
The import duties, of 25% on steel and 10% on aluminium, were mainly aimed at curbing imports from China.
South Korea had received a quota of about 2.68-million tonnes of steel exports, or 70% of the annual average Korean steel exports to the US between 2015 and 2017, which would be exempt from the new tariffs, the ministry said in a statement.
South Korea was not allowed to export steel products exceeding that quota to the US market, a ministry official said, saying the US was "restricting import volume". South Korea is the third-largest steel exporter to the US and the world’s top importer of Chinese steel, leading to the concern it was a conduit for China’s excess capacity.
Trade war fears
Trump was elected in 2016 after promising to punish what he saw as unfair trade practices by other countries, particularly China.
Alarm over a possible trade war between the world’s two largest economies has chilled financial markets as investors foresee dire consequences should trade barriers go up.
Shares in South Korean steelmakers rallied sharply on Monday, with Dongbu Steel leading gains, on the expectation of tariff exemptions.
South Korea’s steel association said in a statement it was a "relief" that South Korea had been excluded from US steel tariffs, but it was regrettable it was unable to secure higher quotas for steel exports.
South Korea’s steel industry would "try to pave the way to ease US restrictions on steel exports", the association said in a statement.
Car concessions
South Korea and the US also agreed that US tariffs on Korean pickup trucks would remain in place until 2041, extended by 20 years from the previous phase-out schedule of 2021.
Under Korus revisions, US car makers will be able to bring into South Korea 50,000 vehicles per car maker per year that meet US safety standards, not necessarily Korean standards, up from 25,000 vehicles previously.
Kim said no car makers previously exceeded the 25,000-vehicle threshold a year. Ford and General Motors each shipped fewer than 10,000 vehicles from the US to South Korea last year.
"I don’t see a high chance of car makers expanding US imports," he said.
South Korea also said it would "take into account US standards and global trends" when Seoul decided its fuel economy and emissions rules from 2021 to 2015.
"South Korea gave concessions in autos in return for steel tariff exemptions," former chief negotiator for the Korus FTA, Kim Jong-hoon, said. "I think South Korea fared well despite the US offensive."
South Korean car makers should make investments and hire new workers in the US to build pickup trucks to avoid the 25% tariff, he said.
"This is not a free trade, but a managed trade."
Reuters
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