On the 10th (local time), U.S. President Donald Trump signed an executive order imposing a 25% tariff on steel and aluminum imported into the United States. President Trump noted that the 25% tariff would apply to all countries without exceptions or exemptions. The White House stated that this measure would take effect on March 4.
A 25% tariff will be imposed on Korean steel and aluminum entering the United States starting from the 12th of next month. This is because the quota system that limited the export volume of Korean steel products, instead of imposing tariffs, during Trump's first term in 2018 will be abolished on March 12. In a proclamation titled "Adjusting Imports of Steel into The United States" released by the White House, President Trump mentioned countries such as Korea, Argentina, Australia, Brazil, Canada, Mexico, European Union (EU) member states, Japan, and the United Kingdom, where tariff exemptions were applied during the first term, stating, "We have determined that steel imports from these countries threaten to undermine national security and decided that it is necessary to terminate the prior agreement as of March 12, 2025."
Korea currently exports 2.63 million tons (t) of steel to the United States annually without tariffs. Tariffs do not apply to this volume, and exports beyond this amount are not allowed. The Trump administration, based on Article 232 of the Trade Expansion Act of 2018, imposed a 25% tariff on imported steel while limiting the export volume of Korean steel to 70% of the average export volume from 2015 to 2017 through negotiations between the Korean and U.S. governments. The United States was the fourth-largest source of steel imports from Korea last year, following Canada, Brazil, and Mexico. Last year, the U.S. was the top destination for Korean steel exports by value.
As U.S. sales are substantial, the abolition of the export quota and the imposition of tariffs are likely to severely impact the domestic steel industry. Major steel companies are responding by considering various measures, including constructing steel mills in the United States and exploring new markets outside the U.S. Companies planning to secure production facilities in the United States are expected to accelerate their investment decisions.
POSCO Holdings is considering building a blast furnace plant in the United States where iron ore will be melted to produce molten iron using a blast furnace and an electric arc furnace. Given the high costs, the company is examining investment risks from multiple angles. POSCO noted during its earnings announcement earlier this month regarding the establishment of production facilities in the U.S., "It requires a considerable investment, and given the high volatility, we are carefully reviewing various options."
Hyundai Steel had been reviewing plans to build a steel mill in the United States in response to tariff barriers even before the launch of the second Trump administration, but has not finalized any plans yet. The company is considering producing automotive steel plates locally to supply Hyundai Motor and Kia's Georgia plant, but has not secured funding options that amount to several trillion won. There are discussions about selling some of the equity held by Hyundai Steel's affiliates to reduce borrowing funds, but this is expected to be a complicated decision due to entanglements with the group governance structure.
Union opposition is also a variable for establishing a factory in the United States. Hyundai Steel's union went on a general strike on the 11th, stopping operations for 24 hours from 7 a.m. that day, except for key equipment. It is anticipated that the union will strongly oppose the potential reduction of domestic business sites if the company announces plans to build a large-scale factory in the United States.
SeAH Group is relatively better off as it is the only Korean steel company with a production plant in the United States. SeAH Steel Holdings acquired a pipe mill in Houston, Texas, in 2016, producing approximately 250,000 tons annually. SeAH Steel Holdings is reportedly considering expanding the Houston plant. Its subsidiary, SeAH Steel, stated that it would respond while closely watching the specific details regarding the tariffs. SeAH Steel is currently exporting 280,000 tons of pipes to the United States, adhering to the quota restrictions.
Dongkuk CM, a subsidiary of Dongkuk Steel Mill focusing on cold-rolled and color-coated steel, is considering producing color-coated steel in Australia. As the volume of exports to Australia is on the rise, the company is exploring establishing a corporation to ascertain local production effects and growth potential. Dongkuk CM is currently exporting 10-15% of its coated steel to the United States but is not considering building direct production facilities in the U.S. It aims to diversify its production bases to countries like Australia to respond to U.S. tariff risks.
There are speculations that intergovernmental negotiations will take place before the imposition of tariffs and the abolition of quotas next month. While President Trump announced a 25% tariff on steel and aluminum for all countries, he hinted at the possibility of tariff exemptions for Australia, citing trade surpluses as a reason. This interpretation suggests that President Trump is leaving room for negotiations. A representative from a steel company remarked, "It is expected that the government will engage in negotiations with the U.S. before the tariffs are applied, but no requests for consultations from the government side have been received yet."