The United States and South Korea have agreed to revise a trade pact sharply criticised by US president Donald Trump, the government in Seoul reportedly said on Monday. Media reports said US automakers would gain improved market access but Korean steelmakers would be hit with quotas while avoiding hefty tariffs.
According to Reuters, the planned changes in the US-Korea Free Trade Agreement (KORUS) were seen as limited, leaving South Korea's key passenger car exports untouched and helping allay fears that Trump's tough approach could start a spiralling global trade war.
Go deeper with GlobalData
In April, Trump told Reuters he would either renegotiate or terminate what he called a "horrible" trade deal that has doubled the US goods trade deficit with South Korea since 2012.
The news agency said the agreement means South Korea will be forced to cut its steel exports to the US by 30% of the past three years' average, in exchange for becoming the first US ally to receive an indefinite exemption on steel tariffs imposed by Trump.
"We had heated discussions," South Korean Trade Minister Kim Hyun-chong told Reuters at a media briefing in Seoul.
"The latest agreement removed two uncertainties," he said, referring to steel tariff exemptions and KORUS renegotiation.
How well do you really know your competitors?
Access the most comprehensive Company Profiles on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Thank you!
Your download email will arrive shortly
Not ready to buy yet? Download a free sample
We are confident about the unique quality of our Company Profiles. However, we want you to make the most beneficial decision for your business, so we offer a free sample that you can download by submitting the below form
By GlobalDataSouth Korea has received a quota of about 2.68m tonnes of steel exports, or 70% of the annual average Korean steel exports to the US between 2015-2017, which will be exempt from the new tariffs, the ministry said in a statement cited by Reuters.
South Korea is not allowed to export steel products exceeding that quota to the US, a ministry official told the news agency.
South Korean officials told Reuters that while the deal agreed was the best they could hope for, further pressure on trade was likely under Trump's presidency.
"If President Trump becomes a two-term president … I believe there will be continuous (trade) risks during that time," trade minister Kim said.
As part of the KORUS revision, the countries agreed to extend US tariffs on Korean pickup trucks by 20 years until 2041, Reuters noted.
No South Korean automakers currently export pickup trucks to the US but Hyundai Motor said last year it planned to launch a model there to catch up with a shift away from sedans.
Hyundai told Reuters on Monday it was "too early to elaborate on the details such as the estimated timing of the model release and production location".
Under KORUS revisions, US automakers will be able to bring into South Korea 50,000 vehicles per automaker per year that meet US safety standards, not necessarily Korean standards, up from 25,000 vehicles previously.
Kim told Reuters no automakers previously exceeded the 25,000 vehicle threshold. Ford and General Motors each shipped fewer than 10,000 vehicles last year.
"I don't see a high chance of automakers expanding US imports," he said.
Kim Jong-hoon, a former chief negotiator for the KORUS FTA, said South Korea had fared relatively well in negotiations.
"South Korea gave concessions in autos in return for steel tariff exemptions," he told Reuters. "This is not a free trade, but a managed trade."
