Pushing in Two Ways
U.S. President Donald Trump signed an administrative order to impose a 25% tariff on imported steel in accordance with Section 232 of the Trade Expansion Act of 1962 while exempting Canada and Mexico unlike South Korea. The two countries are the largest and fourth-largest steel exporters for the U.S., respectively. In addition, he said on March 9 that he would exempt Australian steel and aluminum from import duties. According to industry sources, this move of the U.S. is a “high level tactic” for handling its ally South Korea in the trade agreement between the two countries.
In provisionally exempting Canada and Mexico from the import duty, the U.S. President said that he would make his final decision in view of the progress of the ongoing NAFTA negotiations. “It seems that the U.S. government is making use of the import duty to wrap up the negotiations as soon as possible,” the Korea International Trade Association explained.
South Korea has become subject to the tariff in spite of the fact that KORUS FTA renegotiations are underway as is the case with the NAFTA negotiations. According to trade experts, this is because the two different negotiations have different situations. The NAFTA negotiations are to overhaul the entire framework whereas the KORUS FTA renegotiations are partial and do not require any parliamentary ratification.
The second round of KORUS FTA renegotiations ended on February 1 and the third round is scheduled for late this month. The U.S. government focused on additional automobile market opening and so on in the previous two rounds. The administrative order, signed on March 8, becomes effective in 15 days from the date.
In the meantime, a high-ranking official at the Ministry of Trade, Industry & Energy met with South Korean steel companies immediately after the U.S. government invoked Section 232 of the Trade Expansion Act of 1962 on March 9 and said that South Korean steel has become a target of the section due to transshipment export and they need to endure hardships to properly address the United States’ concerns.
The U.S. government has imposed high retaliatory tariffs on South Korean steel, claiming that South Korean steel companies are importing a lot of steel from China and selling it in the United States with little change. It is said that the South Korean government recently discussed less use of Chinese materials and less exports to the U.S. in order to deal with the tariffs. “It seems that the South Korean government is regarding the measures as its only options with additional tariffs around the corner,” said an industry insider.
Previously, the South Korean government tried to persuade the U.S. by explaining that the ratio of reprocessed Chinese steel was as low as 2.4%. Nonetheless, it failed to prevent the invocation of the section in the end. Under the circumstances, the South Korean government is considering that its focusing on the Korea-U.S. defense alliance is not enough to persuade President Donald Trump.