The trade pressure from the Trump administration is intensifying. In addition to the 25% tariff on steel imports, there are growing concerns about 'non-tariff barriers' such as taxes and import restrictions that have hindered access to the Korean market, which have spread to industries such as livestock in the U.S. As it will be difficult to easily accept demands for the improvement of non-tariff barriers cited as a basis for U.S. reciprocal tariffs, negotiations by trade authorities are expected to face difficulties.
According to the government on the 12th, the U.S. enforced a measure at midnight (local time) that imposes a uniform 25% tariff on all steel and aluminum import products.
Unlike during the first Trump administration, all previously applied tariff exemptions based on agreements with various countries have been eliminated, and Korea has also been included in the tariff targets. Through negotiations with the U.S. in 2018, Korea had agreed to introduce a quota system and had been exempted from tariffs until now.
With the new tariff measure, U.S. companies like U.S. Steel are expected to gain price competitiveness, and some demand for Korean products will likely shift to U.S. products. The Economic Research Institute of the Industrial Bank of Korea analyzed in a report titled 'Impact of U.S. General Tariffs on Domestic Exports' that, "if the U.S. implements a 25% tariff on steel, the value of steel exports to the U.S. will decrease by $498.6 million." This indicates a 11.47% drop from Korea's steel export value last year ($4.347 billion).
However, since the 25% tariff applies to all countries globally, the government believes that the competitive environment with major exporting competitors will not worsen. Some cautiously expect that the elimination of upper limits on export quantities may allow Korean companies to actively enter the U.S. market.
The issue is the reciprocal tariffs scheduled for the 2nd of next month. If reciprocal tariffs are applied differently among countries, they could significantly impact the competitive environment in the steel industry. A government official noted, "General tariffs may provide a plus alpha for domestic industries," adding, "However, we are concerned about the differences that may arise from reciprocal tariffs based on each country."
President Trump is raising concerns about non-tariff barriers when implementing reciprocal tariffs. The Office of the United States Trade Representative (USTR) is expected to submit a report to President Trump by the 1st of next month identifying unfair trade practices of trade partners and suggesting measures for improvement.
According to the comments submitted by the U.S. steel industry to the USTR, they pointed out that "Korea's value-added tax system, policy finance, tax exemptions, and electricity rates lower than market prices negatively affect U.S. exports." They claimed that these unfair practices in Korea caused an annual loss of $3.3 billion to the U.S. economy.
Complaints about non-tariff barriers are also being raised in industries such as livestock. The National Cattlemen's Beef Association (NCBA) requested the USTR the previous day to "lift the import restrictions on U.S. beef aged over 30 months."
Due to concerns about mad cow disease during the Lee Myung-bak administration in 2008, Korea has banned the import of U.S. beef from cattle over 30 months old. Nevertheless, last year, the export value of U.S. beef to Korea was $2.22 billion, the highest in the world.
The USTR stated in last year's 'National Trade Barriers Report (NTE)' that "the export restriction measures agreed with Korea have been maintained for 16 years despite being a transitional measure," indicating that exporting beef over 30 months is essentially necessary. As Korea already imports a massive amount of U.S. beef, the government is concerned about unnecessary import expansions.
The Ministry of Industry announced that it will immediately begin consultations on these trade issues with the U.S. Following the ministerial-level consultations that began at the end of last month, Jeong In-kyo, head of the Trade Negotiation Headquarters, plans to visit Washington, D.C. on the 13th and 14th to meet with senior government officials including the USTR.
A Ministry official stated, "We plan to consult on mutual tariffs and other U.S. tariff measures to minimize the impact on our corporations and reiterate the need to create a stable investment environment for our corporations implementing investment projects in the U.S."
However, there are analyses suggesting that immediate consultations regarding improvements to non-tariff barriers demanded by the U.S. will be difficult. Matters such as value-added taxes and restrictions on beef imports require whole-of-government consultations with the Ministry of Economy and Finance and the Ministry of Agriculture, Food and Rural Affairs. Moreover, since the ban on importing U.S. beef over 30 months is related to the mad cow disease issue, public opinion must also be considered.
A government official remarked, "When it comes to beef imports, we need to consider 'public concerns about mad cow disease' more than economic factors," adding, "Even if the U.S. government makes an official request, there must be solid evidence that it is safe."