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Trump's tariffs pose test to broadening economic partnership with Korea

Published: 12 Feb. 2025, 10:20

U.S. President Donald Trump signs an executive order in the Oval Office of the White House on Feb. 10, in Washington, DC. [AFP/YONHAP]

From planned levies on steel and aluminum imports to threats of duties on cars and chips, U.S. President Donald Trump's tariff-based policy approach is sending Korea scrambling to navigate through it and keep the bilateral partnership steady and sturdy.

After slapping a 10 percent tariff on Chinese imports, Trump appeared Monday to be shifting his attention to Korea and other trading partners with plans to reinstate a 25-percent tariff on steel imports and raise the tariff rate on aluminum imports to 25 percent from 10 percent — both starting March 12.

On top of those plans, he noted that his administration will announce "reciprocal tariffs" this week, while weighing new tariffs on vehicles, chips and pharmaceuticals, raising the prospects of friction with key suppliers of those items, including Korea.

The tariff announcements came as Seoul has been struggling to chart a smooth path ahead to keep its relationship with the second Trump administration on an even keel in the midst of political uncertainty caused by impeached President Yoon Suk Yeol's martial law bid in early December.

"As President Trump seeks to bolster American strength, he expects prosperous and technologically advanced allies to do more for their regional security and to support U.S. exports, jobs and industries. The steel and aluminum tariffs initiate a series of policies designed to protect and grow essential U.S. industrial sectors," Patrick Cronin, the chair for Asia-Pacific Security at the Hudson Institute, said.

"President Trump is moving swiftly, unleashing a period of hyper-negotiation amid a moment of South Korean relative political weakness. Seoul needs to lean into its private sector to remind the White House why the alliance matters, finding new investments in AI data centers, energy, shipbuilding and defense industrial cooperation," he added.

On Tuesday, the White House defended the tariff measures on steel and aluminum imports as an effort to counter trade practices that "undermine national security," claiming that tariff exemptions and loopholes have permitted evasion of the duties and weakened their efficacy.

U.S. President Donald Trump speaks to the press after signing an executive order in the Oval Office of the White House in Washington, DC, on Feb. 10. [AFP/YONHAP]

In 2018, Trump rolled out a 25-percent tariff on steel imports and a 10-percent duty on aluminum imports on national security grounds. But his administration granted Korea and other partners duty-free exemptions in return for import quotas — an "alternative agreement" Trump plans to cancel under this week's tariff proclamation.

"The countries of Argentina, Australia, Brazil, Canada, Japan, Mexico, South Korea, the European Union, Ukraine and the United Kingdom had received exemptions, which prevented the tariffs from being effective," the White House said in a fact sheet.

"By granting exemptions to certain countries, the United States inadvertently created loopholes that were exploited by China and others with excess steel and aluminum capacity, undermining the purpose of these exemptions," it added.

Claiming that Trump's tariff decision is strengthening America's manufacturing industry, the White House, moreover, highlighted that Hyundai Steel, a Korean steelmaker, is "actively" considering building a steel plant in the United States.

It went on to say, "The United States does not want to be in a position where it would be unable to meet demand for national defense and critical infrastructure in a national emergency."

Trump has been using tariffs to address America's trade deficits and achieve other policy goals, including preventing the inflow of illegal migrants and drugs into the United States despite questions about its potential effect on prices, supply chain resilience and trade ties with partners.

Mounting the latest tariff salvo on Monday, Trump said he is considering tariff exemptions for Australia after discussing the matter with Australian Prime Minister Anthony Albanese during a phone call — a remark that was keenly watched by Korea and others that hope for an opening to negotiate an exemption deal.

"We have a surplus with Australia, one of the few, and the reason is they buy a lot of airplanes," Trump told reporters, stressing that his government would give "great consideration" to the U.S.' surplus in trade with Australia.

Korea's Acting President Choi Sang-mok speaks during an economic meeting of senior government officials at the central government complex in Seoul on Feb. 11. [YONHAP]

After the tariff announcement, the Korean government vowed stepped-up efforts to explore ways to minimize any impact from the upcoming duties on steel and aluminum, while pledging to continue policy communication with the U.S. side until tariffs take effect next month.

"Concerns over a U.S. tariff policy change are becoming a reality," Korea's Acting President Choi Sang-mok said during an economic meeting of senior government officials.

He added, "Though we are concerned about a potential worsening of profitability in the industry, there might be opportunities arising from companies competing on the same footing [without exemptions]. Having said that, we will craft measures to strengthen the competitiveness of the steel industry while communicating with industry stakeholders."

Last year, Korea exported 28.35 million tons of steel, with 2.77 million tons shipped to the United States, according to the Korea Iron & Steel Association. Canada, Mexico, Brazil and Korea are among the top exporters of steel into the United States.

Tariffs and threats of duties on other Korean exports like cars come at an inopportune time for Seoul as questions linger over whether Korea can continue to ensure and strengthen a top-level communication channel with the Trump administration at a time of domestic political travails.

While Japanese Prime Minister Shigeru Ishiba held his first in-person summit with Trump in Washington last week, acting President Choi has not been able to even talk over the phone with the U.S. president.

Some experts underscored the need for Seoul to make a portfolio of items that it can transact with Washington in pursuit of a win-win partnership, given Trump's perceived transactional approach to allies and partners under his America First credo.

"As many say Trump view everything from a business perspective, South Korea needs to proactively find ways to help the U.S. achieve what it wants in Northeast Asia," Nam Chang-hee, professor of international politics at Inha University, told Yonhap News Agency.

"It could be helping the U.S. repair or acquire naval ships, or boosting cooperation in the chip industry. South Korea should figure out a way to open space for bilateral cooperation rather than sitting idle."

Observers also highlighted that Seoul should stress the growing scale of Korean companies' investment in the United States that helped create jobs and help local economic growth.

Yonhap