The U.S. Department of Commerce’s investigation report sent to President Donald Trump was released on Friday (local time) that includes recommendations to impose tariffs on steel and aluminum imports based on the Trade Expansion Act’s Section 232. Section 232 states that strong trade measures can be adopted if certain imports are thought to impair the national security. The Commerce Department has recommended three alternative remedies including a global tariff of at least 24 percent on all steel imports from all countries and a tariff of at least 53 percent on steel imports from 12 countries including South Korean and China. President Trump is required to make a final decision by April 11.
The latest proposal comes on the heels of the ongoing renegotiation of South Korea-U.S. FTA and Washington’s adoption of safeguard measures on washing machines and solar panels. South Korea’s Ministry of Trade, Industry and Energy and domestic steel companies held an emergency meeting on Saturday and discussed countermeasures. A way out, however, is seemingly nowhere to be seen. South Korean steel manufacturers will not be able to export their products to the United States, which account for 11 percent of their exports, once Washington decides to impose tariffs on certain countries in which Seoul is included. Given that POSCO’s steel plates are already being slapped with around 60 percent anti-dumping and countervailing duties, another 53 percent tariff would harm the steelmaker’s price competitiveness to the extent that export itself would be actually blocked.
It is noteworthy that the Commerce Department excluded countries such as Canada, which makes up the largest proportion of U.S. steel imports, Mexico, Japan and Germany, while including South Korea in one of the alternative remedies to impose tariffs on specific countries. This may reflect the view of U.S. companies that South Korean steel producers process Chinese steel slates and ship to the United States at low prices, and may be Washington’s strategy to take the advantageous position in discussing the revision of the FTA with South Korea.
Yet, some say that recent discords between the two allies as to diplomacy and security have been resulting in Washington’s economic retaliation. In fact, when asked “You think North Korea is trying to drive a wedge between the two countries, between you and President Moon?” in an interview with The Wall Street Journal on Jan. 11, Trump said that “We also have a thing called trade. That’s a pretty strong bargaining chip,” implying possible economic pressure on Seoul. Now the South Korean government should weigh the scope and impact of U.S. trade measures to decide whether they are actually believed to be retaliatory.
The most sensible option that the South Korean government can choose in the face of Washington’s imposition of tariffs on steel imports is to file a petition with the World Trade Organization (WTO) and U.S. Court of International Trade (CIT) amid cooperation with the international community. Yet, as Trump has not made a decision on a final remedy yet, we should first persuade Washington actively arguing such a retaliatory measure can also hurt U.S. consumers and companies. Indeed, the U.S. government’s decision to slap tariffs on imported solar panels has already backfired, resulting in the reduction of workers employed by U.S. companies that used to maintain their competitiveness thanks to low-priced imports. In addition, before complaining that Japan, another ally, has not been included in the latest measure, we need to refer to Japan’s preemptive pledge to invest 150 billion U.S. dollars and create 700,000 jobs in the United States over the next 10 years even by mobilizing its public pension.