Korean Automakers Heave a Sigh of Relief
The United States will exempt South Korean automobiles from any future tariffs because South Korea renegotiated the U.S.-Korea Free Trade Agreement (KORUS) last year, Bloomberg reported on May 16.
Bloomberg said it has obtained a draft executive order which is expected to be signed by U.S. President Donald Trump this week. According to the order, automobiles from South Korea will be exempted from punitive tariffes, along with those from Canada and Mexico.
According to Bloomberg, Trump will delay new auto tariffs for 180 days for the EU and Japan, during which they are expected to agree to a deal that would “limit or restrict” imports of automobiles and their parts into the U.S. It means that Trump will push back the decision date to Nov. 14.
Trump was facing a May 18 deadline to make a decision on auto tariffs. Passenger cars are now subject to a 2.5 percent U.S. tariff but Trump has threatened to raise that to 25 percent, arguing that the EU and other countries have higher barriers to U.S. auto exports.
Bloomberg News reported on May 15 (local time) that Trump will refrain from imposing tariffs for up to six months as trade negotiations with the EU and Japan are underway.
The U.S Department of Commerce submitted a report to the White House in February this year on the threats that imported autos and auto parts poses to U.S. national security.
Previously, South Korea, Canada and Mexico settled an automobile trade dispute through a trade agreement with the United States. South Korea has finished revising the KORUS and the amended agreement went into effect earlier this year. Mexico and Canada have signed the new United States-Mexico-Canada Agreement (USMCA), which replaces the North American Free Trade Agreement (NAFTA), and they are pushing ahead with the ratification of the new agreement.
The Trump administration is pushing to increase tariffs on cars based on Section 232 of the Trade Expansion Act, which is designed to immediately restrict imports when foreign products pose a threat to national trade security. The United States has concluded in the executive order that imported automobiles and automotive parts pose a threat to national security as they harm the domestic industry and investment in new technology.
The United States imported US$191.70 billion (228.12 trillion won) worth of passenger cars and light trucks last year, with more than US$90 billion (107.10 trillion won) worth of imports coming from Canada and Mexico.