[News Analysis] President Trump places additional tariffs on US steel imports

President Donald Trump meets with business leaders from the steel and aluminum industry to announce new tariffs on US steel imports at the White House on Mar. 1. (EPA/Yonhap News)

South Korean companies may need to halt steel exports in light of the decision

US President Donald Trump has finally played the card of placing additional tariffs on imported steel. While the tariffs are not as tough as originally feared, their impact will still be considerable. As Trump’s pressure on trade extends in all directions, concerns about the spread of Trump’s “America first” approach are growing not only in Canada, China and the EU but also inside the US.

Affected companies in South Korea admit they may have to stop exporting to the US. During a meeting with leaders from American steel companies at the White House on Mar. 1, Trump said he would be slapping a 25% tariff on steel and a 10% tariff on aluminum and that these tariffs would stay in place for a substantial period of time. Next week, Trump is planning to officially sign an executive order containing the plan.

Previously, the US Commerce Department provided three options to Trump based on Section 232 of the Trade Expansion Act: impose a tariff of at least 24% on all imported steel products; impose a tariff of at least 53% on steel from 12 countries, including South Korea, Brazil and China; or set a quota limiting steel imports from all countries to 63% of last year’s volume. Trump chose the first option, though he set the tariff at 25%, one point higher than the Commerce Department’s recommendation. But Trump did not make clear whether he would exclude Canada and other countries that employ a large number of American workers.

Trump reportedly opted to impose a 25% tariff on all imported steel because steel-importing industries in the US were against any regulation at all but were especially opposed to the option of putting tariffs on 12 specific countries. A senior official in the Ministry of Trade, Industry and Energy (MOTIE) noted that six US economic groups, chiefly representing the steel industry, had recently sent an open letter to the White House officially voicing their objections, stating that steel demand industries generate large employment and value-added in the US and recalling that US safeguards on foreign steel in 2002 actually led to the loss of 200,000 US jobs.

“Their objections may have had some effect,” the official observed. The conclusion is the slightly lower tariff rate of 25% was chosen because imposition of the ultra-high 53% rate on 12 countries alone might result in the procurement price for steel (materials and intermediate goods) in the US rising to match the increase, causing a chain reaction that leads to higher sales prices for final goods and declining consumption and sales for various US products.

Minister of Trade, Industry, and Energy Paik Un-kyu meets with leaders of major Korean steel-producing companies at the Korea Technology Center in Seoul on Feb. 17 to discuss responses to the US administration’s decision to invoke Section 232 of the Trade Expansion Act. (provided by MOTIE)

While South Korea may have dodged a worst-case scenario, some trade experts argue that the Trump administration’s across-the-board tariff assessment means it is effectively declaring trade war on the countries of the world. If South Korea and China were the chief targets of the imported washing machine and solar panel safeguards announced in January, then the latest steel and aluminum tariffs target all countries.

EU, Canada, and China threaten retaliatory tariffs against US

The European Union and Canada have joined China in expressing dismay and threatening retaliatory tariffs of their own. The trade war is expected to heat up further in April, when the US Trade Representative (USTR) is scheduled to publish the “Special 301 Report,” an annual assessment of intellectual property right protection policies and infringements among major trade partners.

With no final decision yet on the matter, Seoul plans to continue actively raising the regulation issue. Following an emergency countermeasures meeting presided over by Minister Paik Un-gyu on Mar. 2, MOTIE declared that it would make “active outreach efforts with the US to ensure that whatever plan is adopted minimizes the damages to South Korean businesses.”

Minister for Trade Kim Hyun-chong, who has been doing his own steel outreach efforts in Washington since Feb. 25, changed his return date to Korea from Mar. 2 to 9. Kim’s plan is to meet with White House National Economic Council (NEC) director Gary Cohn and others to minimize the negative impact before Trump puts his final signature to the executive order.

Makers of steel casing and tubing for energy will be heavily affected

Steel industry sources said the worst had been averted, but added that some blow to South Korea’s exports to the US was inevitable. The biggest hit from Trump’s message landed against the makers of steel casing and tubing for energy purposes – an area where South Korea depends heavily on exports to the US. The majority of oil well casing and tubing used for crude oil and shale gas extraction is exported to the US. South Korea’s steel industry exports to the US totaled US$3.2 billion 2017, with 53% of that coming from energy-related steel products, including oil well and oil pipeline casing and tubing.

“So far we’ve been managed to export oil well casing and tubing despite a 20% tariff, but it’s going to be tough to handle if that goes up to 25%,” said Husteel executive director Kim Kyung-rae. Other steel companies such as Nexteel and Seah Steel are in a similar situation.

POSCO and Hyundai Steel also appear certain to suffer a blow. POSCO is already paying tariffs of 66.04% on cold-reduced carbon steel sheets and 62.57% on hot rolled steel; an additional 25% would bring those respective levels all the way up to 91.04% and 87.57%.

“Few if any places are going to be able to hold out under another 25% in tariffs when the tariffs are already so high,” a Korea Iron and Steel Association source said.

By Hong Dae-sun and Cho Kye-wan, staff reporters and Yi Yong-in, Washington correspondent

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