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Korean steel staves off worst tariffs, for now

Mar 03,2018
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President Donald Trump said Thursday that he would impose tariffs of 25 percent on all imported steel, giving Korean manufacturers - which had expected penalties as high as 53 percent - a bit of relief from a worst-case scenario.

Trump announced his plan to impose the tariffs on steel as well as 10 percent tariffs on aluminum imports at a meeting with heads of 16 American steel and aluminum producers in Washington. He did not elaborate on details of his plan but said the penalty would be in effect for a “long period of time” once he officially signs the trade measures in the coming week.

The announcement comes after an investigation by the U.S. Department of Commerce concluded last month that aluminum and steel imports threatened the country’s national security. The commerce department recommended that Trump either impose sweeping tariffs of at least 24 percent on all steel imports regardless of country of origin, impose at least 53 percent tariffs on steel imports from 12 countries or set a certain quota on all steel imports.

Among the 12 targeted countries were Brazil, China and Korea.

To avoid the worst-case scenario, Korea’s Ministry of Trade, Industry and Energy has threatened to sue the U.S. government in the World Trade Organization if it decides to impose heavy tariffs on just a select number of countries. The option would deal a major blow to Korean exporters not only because of the high taxes but also because major competitors like Japan, Taiwan and countries in the European Union would be exempt from the penalties.

Trade Minister Kim Hyun-chong has been in Washington since Feb. 25 to persuade Trump’s major trade advisers on the possible backlash that such steep penalties could bring.

“We will actively reach out to the United States until the country makes its final decision,” Korea’s Trade Ministry said in a statement Friday after an emergency meeting held in response to Trump’s announcement. “Trade Minister Kim has been reaching out to major trade advisers like Gary Cohn, director of the National Economic Council, and Wilbur Ross, the U.S. commerce secretary.”

However, avoiding the worst-case scenario does not necessarily put Korean steel and aluminum producers on a better track. “We could say we are relieved, but that is only half true,” a spokesperson from Korea’s largest steelmaker, Posco, said. “Tariffs of 25 percent are still a heavy burden for exporters especially in the case of smaller companies.”

Korean exporters of steel pipes - used to extract crude oil and natural gas - are expected to take a substantial hit since the product has been highly dependent on U.S. sales. They include smaller steelmakers like SeAh Steel and Nexteel.

Although Korea remains the third-largest exporter of steel to the United States after Canada and Brazil, shipments have already declined by 1.6 percent last year compared to the previous year, according to data from the U.S. Department of Commerce.

Whether Trump’s protectionist policies will end with imposing penalties on steel and aluminum is another concern. In January, Trump signed off on heavy safeguard tariffs against Korean washers and solar cells. Industry analysts expect the next target to be Korean semiconductors and automobiles.

Korea is not alone in its concerns about a possible trade war. Even traditional allies like Canada and the European Union have announced their will to retaliate against the new tariffs.

Jean-Claude Juncker, president of the European Commission, said Europe “will not sit idly while our industry is hit with unfair measures that put thousands of European jobs at risk,” the Associated Press reported Friday.

According to a New York Times report Thursday, even White House advisers were “bitterly divided” on how to proceed with the tariffs, expressing worries about possible trade retaliation from other countries.

Despite an ongoing legal review, Trump went ahead with the announcement anyway.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]