The Korea Herald

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[Editorial] Tariff bomb

US must not hurt alliance with inequitable trade policy

By Korea Herald

Published : Feb. 18, 2018 - 17:37

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The US Commerce Department recommended Friday that President Donald Trump impose heavy tariffs or quotas on steel imports from South Korea, China and other countries.

The department suggested three options: a global tariff of 24 percent on all steel imports; 53 percent or higher tariffs on 12 countries including South Korea and China; and a quota on steel imports from all countries up to 63 percent of what those countries imported in 2017. Trump must decide whether to adopt any of the recommendations by April 11.

If Trump decides on a global tariff or a quota, South Korea will compete against other steel exporters on similar terms as before, but if 53 percent or higher tariffs on 12 countries is chosen, it cannot but compete against countries not on the list of 12 countries on unfavorable terms.

Worse still, the tariffs suggested by the department will be imposed additionally on those already in place. About 80 percent of Korean steel exports to the US have tariffs imposed on them. Tariffs of 53 percent or higher will effectively ban steel exports to the US. What’s more concerning is the trade crackdown will not likely stop at steel products. It is likely to spread to semiconductors and other industries.

Trade investigation under “Section 232” of the Trade Expansion Act the Commerce Department applied this time seeks to determine whether steel imports pose a threat to the US national security. Critics in the US call for prudence in imposing Section 232 trade actions, citing their negative consequences including retaliatory measures and possible trade war. And yet in view of Trump’s past trade measures, it is hard to expect him to exempt South Korea from the steel import curbs.

The government in Seoul must try to persuade the Trump administration, the US Congress and related industry organizations until the final decision is made, while working on steps to minimize impacts of recommended options on domestic industry and economy.

Korean steel makers must seek to diversify their markets, while developing high value-added products and resetting production and marketing strategies.

Trump’s trade protectionism is nothing new, but his recent remarks targeting South Korea are worrisome. Trump said last week he would push for a “reciprocal tax” against countries, including allies of the US, that levy tariffs on American products. He said “some of the countries are so-called allies but they’re not allies on trade.”

Taking aim at Seoul, which is strained over Trump’s saber rattling over North Korea’s nuclear program, he complained that America’s free trade deal with South Korea “was a disaster.” He renewed his criticism of countries the US helps defend, including South Korea. “They pay us a fraction of what it costs,” he said.

Trump’s remarks cannot be dismissed as a bluff. They are becoming a reality. Washington took emergency import restrictions known as safeguards against large South Korean-made washing machines and solar cells and modules last month, and is said to be considering import restrictions on semiconductors and automobiles. The US has been escalating its demands over the free trade deal with South Korea, which is currently being renegotiated. The number of trade investigations surged 81 percent to 94 for the past year.

Last year, China had $375.2 billion trade surplus with the US, more than 16 times South Korea’s. It is unreasonable to treat South Korea and China equally as countries threatening jobs in America. When it comes to reducing trade deficit, the US should take equitable import curbs based on fact.

By pushing hard to reduce US trade deficits to create jobs in America, he seeks to rally his domestic supporters ahead of the November mid-term elections. His politically motivated moves in an election year are not something to dispute, but he must not go so far as to impair the US-Korea alliance. If their security alliance cracks, both allies will have more to lose than gain.