SEOUL - The United States agreed Monday 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 that has been sharply criticized by U.S. President Donald Trump.
In return, South Korea said it would improve access for U.S. automakers under the bilateral free trade deal known as KORUS, the country’s trade ministry said.
In April, Trump said he would either renegotiate or terminate what he called a “horrible” trade deal that has doubled the U.S. goods trade deficit with South Korea since 2012. Monday’s agreement means South Korea becomes the first U.S. 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 $60 billion (¥6.3 trillion) in Chinese goods has fueled concerns 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 European Union from higher U.S. import duties on steel and aluminium which came into effect Friday.
Japan, meanwhile, got no exemption on the duties.
Japanese companies have started the procedures for requesting exemptions from new U.S. tariffs on steel and aluminum imports that took effect Friday, sources have said.
It will take up to 90 days for the U.S. government to decide whether to exclude specific products from the tariffs.
Trade minister Hiroshige Seko said Friday that he expects exemptions will be granted for at least some products.
The import duties, of 25 percent on steel and 10 percent on aluminium, were mainly aimed at curbing imports from China.
South Korea has received a quota of about 2.68 million tons of steel exports, or 70 percent of the country’s average annual steel exports to the United States between 2015 and 2017, which will be exempt from the new tariffs, the ministry said in a statement.
South Korea is not allowed to export steel products exceeding that quota to the U.S. market, a ministry official said, saying the U.S. is “restricting import volume.”
South Korea is the third-largest steelexporter to the United States and the world’s top importer of Chinese steel, leading to concerns it was a conduit for China’s excess capacity. 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 steel-makers rallied sharply Monday, with Dongbu Steel leading gains, on expectations of tariff exemptions. South Korea’s steel association said in a statement it was a “relief” that South Korea has been excluded from U.S. steel tariffs, but it was regrettable it was unable to secure higher quotas for steel exports.
South Korea’s steel industry will “try to pave the way to ease U.S. restrictions on steel exports,” the association said in a statement. South Korea and the United States also agreed that U.S. tariffs on Korean pickup trucks will remain in place until 2041, extended by 20 years from the previous phase-out schedule of 2021.
Under KORUS revisions, U.S. automakers will be able to bring into South Korea 50,000 vehicles per automaker per year that meet U.S. safety standards — not necessarily Korean standards — up from 25,000 vehicles previously. Kim said no automakers previously exceeded the 25,000-vehicle threshold a year. Ford Motor Co and General Motors each shipped fewer than 10,000 vehicles from the United States to South Korea last year. “I don’t see a high chance of automakers expanding U.S. imports,” he said.
South Korea also said it will “take into account U.S. standards and global trends” when Seoul decides its fuel economy and emissions rules from 2021 to 2015.
“South Korea gave concessions in autos in return for steel tariff exemptions,” the former chief negotiator for the KORUS FTA, Kim Jong-hoon, said. “I think South Korea fared well despite the U.S. offensive.”
South Korean automakers should make investments and hire new workers in the United States to build pickup trucks to avoid the 25 percent tariff, he added.
“This is not a free trade, but a managed trade.”