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U.S. tariff extension on S. Korean trucks to help ward off imports: ITC

All Headlines 11:07 July 03, 2018

By Kim Eun-jung

SEOUL, July 3 (Yonhap) -- A revised bilateral trade agreement calling for a 20-year extension of tariffs on Korean pickup trucks is expected to reduce the United States' imports by over 60,000 vehicles under the most likely scenario, a report by the U.S. International Trade Commission (ITC) said Tuesday.

Seoul and Washington in March agreed in principle to revise the free trade agreement (FTA), which includes delaying the elimination of 25 percent duties on Korean trucks until 2041. The duties were set to be phased out from 2019 to 2021.

The ITC said it is hard to quantify the probable economic effect over a two-decade period because the U.S. currently imports few to none of the motor vehicles in question from Korea.

This graphic depicts South Korea and the United States agreeing to extend 25 percent tariffs on Korean pickup trucks until 2040 in their revised free trade agreement. (Yonhap)

The report estimates the tariff extension's probable economic effect on U.S. imports and domestic production under five scenarios where Korean producers: (1) continue not to supply the U.S. market, (2) supply the U.S. market exclusively through transplant production, (3) supply the U.S. market from Korea and transplant U.S. production (4) same as the third scenario but assuming Korean firms gain higher market share or (5) supply the U.S. market exclusively through Korean exports.

"The commission's estimate of probable economic effect assumes that Korea's share of the U.S. truck market, after tariff elimination (in 2041), either would be zero; would be in line with the market shares for other foreign truck suppliers; or would be in line with Korea's share of the U.S. non-truck passenger vehicle market," the ITC said.

Under the third scenario, considered the most probable, the ITC said the U.S. would be able to prevent imports of 66,600 pickup trucks, or 7.1 percent of total imports of 2017, and prevent a fall in domestic production of 45,000 such models.

The commission assumed the first and second scenario would have almost no effect, while the fourth and fifth scenario could result in preventing imports of over 140,000 pickup trucks to the American market.

South Korea produced 4.1 million vehicles in 2017 to become the world's sixth-largest manufacturer, but in terms of production of light trucks, it ranked 12th globally, the commission said. The nation's trucks exports were primarily diesel pickup trucks that were exported to developing markets in Asia and South America.

While no Korean companies currently export light trucks to the U.S., Hyundai Motor Group and SsangYong Motor Company have expressed interest in selling light trucks to the major vehicle market.

Hyundai's U.S. vice president of corporate and product planning earlier this year stated that a pickup truck for the U.S. market has been approved for 2020 or 2021. The vehicles are likely based on a concept pickup truck shown at automotive shows. In 2016, SsangYong's chief executive said the company plans to sell vehicles in the U.S. as early as 2019, without giving further details of their production plan.

ejkim@yna.co.kr
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