Amid concern that the U.S. plan to levy 25 percent tariffs on imported steel will damage Korea’s mid-tier steelmakers, the government announced that it will continue its outreach to Washington to minimize any negative effects.
Amid concern that the U.S. plan to levy 25 percent tariffs on imported steel will damage Korea’s mid-tier steelmakers, the government announced that it will continue its outreach to Washington to minimize any negative effects.The Ministry of Trade Industry and Energy held a meeting Friday to discuss countermeasures against U.S. tariffs on imported steel.
President Donald Trump said Thursday that the country will impose a 25 percent tariff on foreign steel and 10 a percent tariff on aluminum, despite opposition by U.S. manufacturers that use these products. The official decision will be made as early as next week.
“You will have protection for the first time in a long while, and you’re going to re-grow your industries,” Trump said.
The announcement follows a report by the U.S. Department of Commerce last month, based on the seldom used 1962 Trade Expansion Act, which recommended that the administration should restrict imports of steel and aluminum as they were “threatening the U.S. national security.”
The Commerce Department had suggested three options: quotas on imports; a 24 percent duty on steel imports from all countries; or a 53 percent tariff on imports from 12 countries, including Korea. Trump chose the second option, though he pulled up the tariff by 1 percentage point from the 24 percent tariffs suggested by the department.
Baek Jae-seung, an analyst at Samsung Securities, said that Korea avoided the worst-case scenario, which is the 53 percent tariff. Its main competitors such as Japan, Taiwan and EU were not included on that list.
“It is true that the U.S. steelmakers will benefit most thanks to rising operation ratios and price hikes, but compared with the selective tariffs on a few countries (including Korea), the decision is less detrimental for Korean steelmakers,” he added.
However, damage seems inevitable since the U.S. has already been levying anti-dumping and countervailing duties on 88 percent of steel imported from Korea. The 25 percent fresh tariffs will be added to these.
The damage will be especially huge on mid-tier manufacturers that exported oil country tubular goods (OCTG) to the United States on the boom in the crude oil or shale gas industries. Korea’s Nexteel, which was slapped with a 46.37 percent tariff on its OCTG by the United States last October, for instance, will face around a 70 percent tariff with the Trump decision.
While top steelmakers like POSCO and Hyundai Steel have diversified their export markets to Southeast Asia and others, the United States takes up a huge portion of the mid-tier steelmakers’ export market. In the case of Nexteel, 90 percent of its exports head to the United States, while the market takes 40 percent of exports by Husteel.
According to the trade ministry, Korea exported 3.54 million tons of steel to the United States last year, which is 38 percent less than 2014.
While the United States’ major trading partners are fiercely protesting the U.S. decision, the government remained cautious as the United States has not made an official final decision yet. However, it said that it will continue outreach in the United States to minimize damage on steelmakers.
Trade Minister Kim Hyun-chong has been in the United States since Feb. 25, meeting key officials including National Economic Council Director Gary Cohn and U.S. Secretary of Commerce Wilbur Ross as well as leading congressmen to point out the negative impact of the recent protectionist measures on the United States.
The decision by Trump is causing controversy within the United States as well since the production by the U.S. steelmakers cannot meet demand. They point out that the rising prices following the tariff hike will only eat into profitability of the U.S. manufacturers using steel, ending up decreasing jobs in the sector.
