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(News Focus) U.S. tariff delay offers relief to Korean carmakers, but uncertainties linger

All Headlines 23:24 May 17, 2019

By Choi Kyong-ae

SEOUL, May 17 (Yonhap) -- South Korean carmakers on Friday breathed a temporary sigh of relief as U.S. President Donald Trump delayed his decision on whether to impose broad tariffs on imported cars and parts.

In a proclamation, the Trump administration announced it will put off a final decision by up to six months on slapping auto tariffs of up to 25 percent on automobile and auto-part imports as talks get under way with Japan and the European Union.

The decision was largely welcomed by Korean carmakers such as Hyundai Motor Co. and affiliate Kia Motors Corp.

"Our member companies have breathed a sigh of relief over the U.S. tariffs decision delay. They accept it as the second-best result, though it is not the best," Kim Tae-nyen, vice president of the Korea Automobile Manufacturers Association (KAMA), told Yonhap News Agency over the phone.

Korean carmakers have been hoping to be exempted from the steep auto penalties as the U.S. is one of the world's two biggest automobile markets along with China.

But Trump didn't clearly mention an exemption for Korean carmakers, though the president said he has "considered" the renegotiated South Korea-U.S. free trade agreement, possibly implying that South Korea could be on the list of tariffs in a worst-case scenario.

In 2018, Korea shipped US$40.9 billion worth of vehicles to the U.S., accounting for 6.8 percent of the country's overall exports valued at $604.9 billion, according to the trade ministry.

The number of Korea-built vehicles shipped to the U.S. was 800,000 units out of the country's total shipments of 2.5 million cars last year, according to the KAMA executive.

"Local carmakers have avoided heavy rainfall for the moment but clouds still hang over them until Trump comes up with a final tariff decision in six months' time," said Kwon Yong-joo, a professor in the automotive and transportation design department at Kookmin University.

If the U.S. decides to impose new tariffs on the EU or Japan or both, but Korea is exempted from the penalties later this year, Korean carmakers will definitely benefit from the decision, he said.

Last year, Trump ordered the Commerce Department to investigate whether imported cars and parts harmed U.S. national security by weakening U.S. carmakers' ability to invest in next-generation technologies.

In February, the Department submitted its "Section 232" national security report laying out a series of recommendations to Trump. The recommendations have not been released.

Trump, who used Section 232 to impose broad steel and aluminum tariffs on countries such as China, Russia and Canada last year, has repeatedly warned that steep tariffs could be imposed on cars made by the U.S.' major trading partners.

His administration appears to be seeking to use the threat as a negotiating ploy to wring concessions from its trading partners.

Some U.S. officials and industry people have said a new 25 percent tariff on millions of imported cars and parts could drive up the average prices of vehicles sold in the U.S. and potentially result in thousands of job losses at local companies.

To avoid the tariffs, Seoul officials and business leaders have met their U.S. counterparts through multiple channels to argue that it is inappropriate for the U.S. to use Section 232 against Korean exporters as Korea has already made concessions in a revised bilateral trade pact with the Trump government that went into effect early this year.

The revised trade pact allows U.S. carmakers to double their exports to South Korea and the U.S. to extend tariffs on Korean pick-up trucks by 20 years to 2041.

"Korea has good reasons to be excluded from the auto penalties given the concessions (in the revised pact) and weak sales in the U.S. market in recent years," Jung Hye-jung, an auto analyst at KB Securities Co., said.

Meanwhile, the South Korean government said earlier in the day that it was working on various steps to cope with the Trump administration's decision on auto tariffs.

South Korea is concerned that it could suffer a considerable setback if the U.S. imposes tariffs on South Korean autos, as the auto industry accounts for 14 percent of production and 12 percent of employment in the country's manufacturing sector.

In this photo taken Sept. 26, 2018, vehicles are lined up to be shipped to roll-on roll-off carriers parked at the port of Hyundai Motor Co. in Ulsan, 410 kilometers southeast of Seoul. (Yonhap)

kyongae.choi@yna.co.kr
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