United States and South Korea reach revised free-trade deal
- Author: Tracy Klein Mar 28, 2018,
Mar 28, 2018, 1:05
President Donald Trump secured his first major trade deal Monday as the United States and South Korea reached an agreement to renegotiate their trade pact, with Seoul agreeing to reduce its steel exports and open its market to USA cars in exchange for an exemption from Trump's global tariffs on steel and aluminum.
According to Reuters, the planned changes in the US-Korea Free Trade Agreement (KORUS) were seen as limited, leaving South Korea's key passenger auto exports untouched and helping allay fears that Trump's tough approach could start a spiralling global trade war.
Korea's trade surplus with the United States was about $18bn previous year, down from $23bn in 2016, according to the Korea International Trade Association. The country also agreed to double to 50,000 the number of United States cars that could be imported without meeting local safety standards, although American manufacturers sell far fewer cars in the market.
Under the pact, Seoul will further open its auto market to USA manufacturers, while accepting a 20-year extension until 2041 to a 25 per cent United States tariff on Korean pick-up trucks.
The agreement in principle came amid a flurry of exemptions and revisions to the steel and aluminum tariffs announced by the White House this month. Free Trade Agreement (KORUS), a trade agreement President Donald Trump has long criticized as a "horrible" deal.
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.
The U.S. government exempted the import duty in return for additional opening of the South Korean automobile market.
"We are going to proceed with our tariffs". As part of the agreement, South Korea will limit its shipments of steel to the USA to about 2.68 million tonne annually, or 70% of the annual average Korean steel exports to the U.S. between 2015 and 2017.
South Korean automakers should make investments and hire new workers in the United States to build pick-up trucks to avoid the 25 per cent tariff, he added.
Seoul is the third-largest steel exporter to Washington. The current ceiling is 25,000 cars, but there's no USA company that sells more than 10,000 cars a year, Kim said. "I think what we are doing is long-term good for the economy", he said. Ford Motor Co and General Motors each shipped fewer than 10,000 vehicles from the United States to South Korea past year.
The loosened safety inspection regulations are likely to result in an increase in German and Japanese vehicle exports from the U.S.to South Korea.
"This is not a free trade, but a managed trade".