The U.S. and South Korea reached an agreement on revising their six-year-old bilateral trade deal, and the U.S. said it wouldn’t impose President Donald Trump’s tariffs on steel imports from its ally in Asia.
The two countries reached agreement “in principle” on the trade deal known as Korus, South Korea’s trade ministry said in a statement on Monday. While Korea avoids the steel tariff, shipments of the metal to the U.S. will be limited to a quota of about 2.7 million tons a year, according to the statement.
The announcement came after Treasury Secretary Steven Mnuchin said U.S. Trade Representative Robert Lighthizer reached “a very productive understanding.”
“We expect to sign that agreement soon,” Mnuchin said on the “Fox News Sunday” program, calling it “an absolute win-win.”
The quota is unlikely to hurt South Korea’s steel exports as sales to the U.S. account for 11 percent of total steel shipments overseas, the South Korean ministry said. The quota is set at 70 percent of the average of steel sales to the U.S. during 2015-2017.
The deal is the result of four weeks of talks, but the risks in doing trade with the U.S. will persist during Trump’s presidency, according to Trade Minister Kim Hyun-chong. South Korea was the first to secure the steel tariff exemption on a country level, according to Kim, but officials will continue to discuss whether the exemption will be permanent or expire after a time.
The Korea Iron & Steel Association thanked the government for working to achieve the deal, but regretted that a bigger quota wasn’t achieved.
Korea’s trade surplus with the U.S. was about $18 billion last year, down from $23 billion in 2016, according to the Korea International Trade Association. Cars accounted for more than 70 percent of the value of the surplus.
The U.S. was most interested in the car trade, according to trade minister Kim. The U.S. will maintain tariffs on Korea’s exports of pick-up trucks until 2041, from the previously agreed 2021, according to the statement. Currently, no car company exports these vehicles from South Korea to the U.S., which was a factor in Korea agreeing to this change, Kim said.
Tariffs on Korean car exports that had been lifted won’t be reimposed, Kim said, and the nation will ease some of the safety and environmental regulations on imported U.S. cars, according to the statement. The government will now allow U.S. manufacturers to sell up to 50,000 cars in Korea that meet U.S. safety standards, but don’t meet Korea’s. The current ceiling is 25,000 cars, but there’s no U.S. firm that sells more than 10,000 cars a year, Kim said.
Korea didn’t agree to any additional opening of the agriculture market and also maintained its stance in other sensitive areas, the statement said. The two countries were able to reach agreement by narrowing the range of discussions and will seek to settle the details soon, the ministry said.
The two countries also discussed changing the wording of the Investor-State Dispute Settlement and trade remedies, and Korea said it will review a request from the U.S. for Seoul to offer equal incentives to global pharmaceutical companies in developing new medicines.