U.S. steel and aluminum tariffs: what they mean for South Korea

A major trade shift has hit steel and aluminum industries around the world with the Trump administration's new tariffs enacted earlier this week.

Joining me in the studio to discuss is our trade correspondent, Moon Hye-ryeon.

Welcome, Hye-ryeon.

Thank you for having me.

So Hye-ryeon, could you walk us through what the new tariffs are and what countries are subject to levies?

The new tariffs that rolled out on Wednesday are hitting all steel and aluminum exports to the U.S. with the rate levied at 25 percent.

Up until now, the Trump administration's tariffs were targeted at specific countries – Canada, Mexico and China.

But these sweeping tariffs on steel and aluminum apply to countries around the world, including South Korea.

Previously, such exports from South Korea to the U.S. were duty-free but capped at 2-point-6-3 million tons under a quota system.

What impact is this tariff expected to have on the steel and aluminum industries here in South Korea?

Now that all shipments will face the tariffs without a quota, this poses both risks and opportunities.

As tariffs now apply to top exporters that had formerly enjoyed tariff and quota-free exports to the U.S., South Korea --the fourth largest supplier to the U.S. --may find new openings in the U.S. market.

Still, the risks are significant, with intense competition such as cheaper steel products from Southeast Asia, as well as the inclusion of steel and aluminum-derived products – such as bolts, nuts, and springs – under the new tariff scheme.

These products are primarily manufactured by small and medium-sized businesses, which have fewer resources to absorb the impact, making them especially vulnerable to financial losses.

Shinjin Fasteners is one such company that produces nuts and bolts, with 35 percent of its sales dependent on exports to the U.S. and Europe.

"Developing new products to stay competitive isn't easy, especially when it comes to sourcing materials. It's not like there's a set supply from the start --you have to create value and generate demand through product development."

Another company, GJ Aluminum, faces the challenges of diversifying its exports.

"We're trying to focus more on Europe and Southeast Asia, but the challenge is that our facilities have primarily been set up for the U.S. market and each of these new regions has very different requirements and characteristics."

How has South Korea's government responded to these concerns?

The government, for its part, has been ramping up efforts to counter these impacts.

Acting President Choi Sang-mok outlined measures on Thursday to support such SMEs – ordering ministries to prevent market imbalances from surplus steel as well as designating a task force with the Korea Trade-Investment Promotion Agency to assist companies in navigating the new trade landscape.

Meanwhile, the Ministry of Startups and SMEs and the Ministry of Trade, Industry and Energy have each convened meetings with industry insiders this week in order to gauge market reactions and needs.

"It looks to be around 1800 domestic firms that are currently exporting to the U.S. We want to move quickly with a survey to get a clearer picture of the expected impact and what kind of targeted support these businesses will need."

The Trade Ministry pledged to support exporting firms with a total of 61-point-1 billion Korean won – roughly 42 million U.S. dollars – in export vouchers.

This initiative allows SMEs to access services essential for overseas market expansion, including legal consulting and trade certifications.

With the recent rise in global trade uncertainties, the government has increased the export voucher budget by nine percent compared to last year.

And how is Seoul planning to move forward in the days to come?

Moving forward, the government is planning to announce a detailed and comprehensive response strategy sometime this month.

During a meeting with industry leaders on Thursday, the Industry Minister highlighted plans to strengthen trade defense mechanisms.

"The government is toughening up its trade defenses to crack down on unfair trade practices and boosting the resources of our trade commission to dig into these issues. We also plan to strengthen monitoring of unfair imports."

There's also aggressive negotiations with the U.S. with the country's Minister for Trade landing in Washington on Friday for high-level talks.

"If we think of this like a test, they must have some kind of grading rubric, right? We need to figure out what that rubric is. Then we need to quickly fix anything we're getting wrong, and we need to convince them of the things that we can argue against."

With trade negotiations ongoing, officials stress that both short-term financial aid and long-term structural adjustments will be crucial for the survival and competitiveness of Korean firms in the global market.

Right, thanks for the wrap-up, Hye-ryeon.

Thanks for having me.