The United States is increasingly resorting to trade protectionism ahead of the upcoming presidential election. Under the circumstances, the U.S. Department of Commerce decided to impose high anti-dumping tariffs on coated steel sheets and cold-rolled steel sheets imported from South Korea.
On July 21, the Department of Commerce imposed an anti-dumping tariff of 64.59% on cold-rolled steel sheets manufactured by POSCO and a countervailing duty of 38.24% on the same sort of products manufactured by Hyundai Steel. On the previous day, the Department of Commerce imposed tariffs of 47.8% and 8.75% on coated steel sheets produced by Hyundai Steel and Dongkuk Steel, respectively. The final decision regarding the anti-dumping tariff and the countervailing duty is scheduled to be made on September 3 by the International Trade Commission. In addition, the Department of Commerce levied preliminary anti-dumping tariffs of 111% and 49% on July 20 on washing machines Samsung Electronics and LG Electronics manufacture in China, respectively.
This trend has significant implications in that the presidential election is around the corner. Republican presidential nominee Donald Trump officially declared his America First policy on July 21, promising to replace globalism with Americanism and initiate re-negotiations to upend a number of free trade deals including the KORUS FTA. Democratic presidential nominee Hillary Clinton adopted a party platform focusing on protective trade, too. She also said that she would conduct a complete review of trade agreements.
Some say that the United States’ protective trade policy aims at China, and South Korean companies are suffering collateral damage. The Department of Commerce has recently imposed an anti-dumping tariff of 522.23% on Chinese cold-rolled steel sheets and a countervailing duty of 71.35% on Japanese cold-rolled steel sheets. The South Korean steelmakers are grumbling although their rates are lower than those applied to their Chinese and Japanese counterparts.
The problem is that tensions between Washington and Beijing are escalating with regard to the South China Sea issue and the deployment of the THAAD system in South Korea and this is likely to fuel the conservatism of the United States ahead of the presidential election while causing the Chinese government to respond in a defiant manner. Then, the number of protective trade measures targeting South Korean products can soar.
With the situation as it is, the Chinese government decided on July 24 to levy anti-dumping tariffs ranging from 37.3% to 46.3% on electrical steel sheets imported from South Korea, Japan and the EU. Specifically, the item subject to the tariffs is grain oriented flat-rolled electrical steel (GOES) and the tariffs are to be valid for five years to come. With investigations for the tariffs having started in April this year, it is said that this tariff imposition is the Chinese government’s first retaliation against the South Korean government since its decision to accept the missile defense system in the Korean Peninsula. Earlier, South Korean steelmakers had expected a final rate lower than the rate of 14.5% determined in the preliminary investigation, but things went the other way around in the end.
Trade disputes between the U.S. and China that are resulting from the Americanism and China’s response to the issues of South China Sea and the deployment of the THAAD system are exacerbating the uncertainties of the South Korean economy. Furthermore, Seoul may find itself in awkward political, diplomatic and security situations between the two superpowers. The South Korean government would be well advised to do everything possible in order to avoid the side effects of the new isolationism of the U.S. and convince China of the vital necessity of the missile defense system for our security and the peace in the peninsula.