US, South Korea reach agreement on trade, steel tariffs

US getting very close to trade deal with S Korea: Trump

South Korea's Trade minister has revealed that the South Korea and the United States have reached an understanding to revise steel tariffs' free trade agreement (FTA).

Friction over Korus came about when Mr Trump started to blame US's large trade deficit with South Korea on the agreement.

Asian shares steadied yesterday, stemming last week's hefty losses after Mr Trump's action on steel and aluminium, and his plans to impose tariffs on up to US$60 billion (S$78.7 billion) in Chinese goods.

According to figures from the US Commerce Department, the country's total trade deficit with South Korea jumped from $7.7 billion in 2012 to $18.6 billion in 2015, before declining to $10.3 billion past year.

South Korea will be assigned an annual U.S. steel import quota of 2.68 million tons, Trade Minister Kim Hyun-chong said in a statement on the Ministry of Trade, Industry and Energy's website on Monday March 26.

In exchange for the exemption, South Korea will open its markets to US -manufactured autos, expanding the number of cars it imports per manufacturer to 50,000, from 25,000. This also does not affect South Korean automakers because they are now exporting no pick-up truck to the United States.

The revisions set a "bad pre-cedent", said law professor Choi Won Mog of Ewha Womans University.

Trump's hardcore support may be disappointed that he has already begun granting exemptions to his protectionist policies, but close ties between the US and South Korea are of particular importance at this moment in time. While South Korea avoids the steel tariff, shipments of the metal to the United States will be limited to a quota of about 2.7 million tonnes a year, according to the statement.

"The Trump administration needed to harvest an outcome from the negotiation to show its supporters", he added, warning that Washington could in future "slap tariffs on semiconductors" - a crucial South Korean export.

The steel quota is unlikely to hurt South Korea's exports since sales to the United States account for 11% of total overseas shipments of the metal, the South Korean ministry said.

Photo Kim Hyun-chong, the South Korean trade minister, in Seoul on Monday. We said we were going to proceed.

Under the pact, Seoul will further open its auto market to U.S. manufacturers, while accepting a 20-year extension until 2041 to a 25 percent United States tariff on Korean pick-up trucks.

She said: "Recently we have seen how [trade] is used as a weapon to threaten and intimidate us". It was up from 25,000 vehicles under the current deal. At present, vehicles manufactured in the United States and exported to South Korea include Mercedes-Benz GLE, GLE Coupe and GLS and Toyota Sienna. Despite the fact that South Korea's trade surplus with the USA has declined slightly over the past 12 months, it still stands at around $18bn, with the majority stemming from the automobile sector.

"This is not a free trade, but a managed trade".

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