As reported in the above-linked article, the Trump administration has won major concessions from South Korea in exchange for exempting them from the steel tariffs. South Korea agreed to:
- A quota on their steel exports to the U.S. that cuts those exports by 30%.
- Double the quota for American car imports from the current maximum of 50,000 cars to 100,000 cars. (Although it’s not likely that they’ll actually import that many.)
- Allow the U.S. to extend its tariffs on trucks by 20 years until the year 2041. (The U.S. has always maintained a 25% tariffs on truck imports.)
That last item is a big concession by the Koreans, since Hyundai and Kia were geared up to introduce pickups into the U.S. in 2021. This effectively kills those plans.
The U.S. – Korea trade deal, known as “Kotus,” was negotiated by the Obama administration and signed in 2012. That year, our trade deficit with S. Korea was $16.6 billion. In 2017, the deficit was $22.9 billion. Obama had hailed the deal as a “big win for American workers,” but it proved to be exactly the opposite.
These concessions by Korea demonstrate just how deeply tariffs are feared, and how much power the U.S. can wield in trade negotiations with the threat of using them. I hope that Trump is emboldened by this success and applies the same (or more) pressure on others, especially Red China. I hope that this is only the beginning of restoring a balance of trade for the U.S.