Shares in Posco, South Korea’s biggest steel company, took a dive after U.S. President Donald Trump threatened to slap a 25 percent tariff on all steel imports, along with other measures restricting aluminum imports, on Mar. 1. So what impact will the move have on South Korea, traditionally a close ally of the U.S.?
South Korea is the world’s fourth-largest steel exporter, enjoying a 3.5 percent share in the U.S. steel market in 2017 with exports worth $3.4 billion.
In 2017, South Korea was the third-biggest steel exporter to the U.S. after Canada and Brazil, sending 3.6 million tons of steel products to the country.
“Local steel-pipe makers exporting to the U.S., such as SeAh Steel, Husteel and Nexteel, will be worst affected because 57 percent of [South Korean] steel pipe exports go there,” according to Lee Min-woo of Korea Iron & Steel Association.
Researcher Chen Young-chan of Hyundai Research Institute believed South Korea’s large steelmakers would be hit hard, saying, “The U.S. is putting tariffs on their products, which takes a toll on their exports. Of course it is a blow.”
Lately, however, South Korea has been less reliant on U.S. steel importers — South Korean steel exports to the country fell almost 31.5 percent from 2014 to 2017 according to the Ministry of Trade, Industry and Energy. Meanwhile, China surpassed the U.S as the top importer of South Korean steel products in 2016.
Some analysts therefore expect South Korea’s biggest steelmakers to get off lightly.
“The U.S. takes up less than 5 percent of the overall steel exports of Posco and Hyundai Steel, and the majority of their products are already subject to anti-dumping levies,” wrote Lee Jong-hyeong of Daishin Securities.
Steel trade restrictions are nothing new. Between 2014 and 2016, the U.S. applied anti-dumping and countervailing duties on various steel products from South Korea. Seoul appealed to the World Trade Organization in 2014 and won the case last year, but the U.S. has yet to lift the tariffs in question.
“South Korean companies should make a coalition with local, Chinese and even European Union companies to deal collectively with this issue,” said Chen.
Cover image: A ladle of molten steel. (Source: Wikimedia)