FKI asks Trump to exempt Korea from tariffs
The Federation of Korean Industries (FKI) asked the U.S. government to exempt Korea from higher tariffs on steel and aluminum imports.The business lobby group said Sunday it sent letters to all U.S. legislators and high-ranking government officials, including Senator Orrin Hatch, who is the Senate Finance Committee chairman, Commerce Department Secretary Wilbur Ross and Secretary of State Rex Tillerson.
In the letter, FKI Chairman Huh Chang-soo stated that while Korea understands the Donald Trump administration’s efforts to reduce U.S. trade deficits, a move against Korean steel imports should be reconsidered.
The FKI chairman stressed the alliance between the two countries under the mutual defense treaty since 1953 and noted how Korea’s investment in the United States has more than doubled since a bilateral free trade agreement between the two countries went into effect in 2012.
Huh said restriction on imports of steel will result in side effects including reduction in jobs and delays in production and supply that would affect many industries, including retail, as steel and aluminum are used in everything from airplane and cars to soft drink cans.
He said such an action could start a trade war and expand trade protectionism around the world.
Korea shouldn’t be included in restrictions on steel imports as it does not indirectly export Chinese steel, an argument that the Korean government has also been making.
Some analysts believe Trump’s main target is China, which is the 11th-largest steel exporter to the U.S.
But the 25-percent tariffs on steel Trump announced last week - smaller than 53-percent tariffs proposed by the U.S. Commerce Department on 12 including China and Korea - seem to apply to all steel imports.
They are expected to have a huge impact on the Korean steel industry, since Korea is the third-largest exporter of steel to the United States after Canada and Brazil.
There are growing concerns that the tariffs on imported steel and aluminum are just the beginning and other major categories of goods, including semiconductors and automobiles, could be next.
Trump already applied tougher tariffs on Korean washing machines and solar panels in January.
On Thursday, Trump tweeted, “Our Steel and Aluminum industries (and many others) have been decimated by decades of unfair trade and bad policy with countries around the world.”
He concluded that the U.S. wants “free, fair and SMART TRADE!”
“For Korea, which is heavily dependent on exports, the issue of trade protectionism is a major burden,” said Seo Sang-young, an analyst at Kiwoom Securities.
Such sentiments have been shared in the United States as well, especially as the higher tariffs could hike the prices of U.S. goods.
One of the first to criticize Trump’s higher tariffs was Dennis Slater, president of the Association of Equipment Manufacturers.
On Friday Slater said, “President Trump shouldn’t undercut his own goal of helping U.S. manufacturers ‘win’ again by imposing counterproductive tariffs on steel imports.”
The conservative economic group Freedom Partners claimed, “The problems with any kind of tariffs or tax hike on imports is that it doesn’t make America more competitive or punish high-tax countries, it only hurts American consumers and businesses by driving up manufacturing costs and ultimately, costing jobs.”
Freedom Partners is funded by the conservative Koch Brothers.
According to Moody’s, the countries that would be most affected are Canada and Bahrain.
Korea, on the other hand, is expected to feel limited effects along with the rest of Asia.
“In Asia, the direct economic effects at the macro level would be very small as exports of aluminum and steel to the U.S. typically amount to less than 1 percent of GDP or exports,” Marie Diron, managing director of sovereign risks group at Moody’s, said in a statement released Friday.
”The direct impact is moderate on Korean steelmakers,” the report added.
However, it did note that over the long haul, higher tariffs on steel and aluminum could start a global trade war, and Asia, which is trade reliant, could be “vulnerable” to a marked slowdown in global trade.
The United States is expected to see its own economic growth fall 0.2 percentage points as a result of the tariffs, according to Barclays.
BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]
with the Korea JoongAng Daily
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