Concerns grow in S. Korea over Trump’s unilateral protectionist moves

Concerns have been growing in South Korea over US President Donald Trump’s unilateral protectionist moves as it is feared to disrupt the global trading order and ignite a trade war.

President Trump triggered “global trade war” in the name of America First, causing backlash from its Western allies such as the European Union (EU) and Canada, as well as from China, a local newspaper Chosun Ilbo said in its recent report.

Under instructions from Trump, the US Commerce Department initiated a so-called Section 232 investigation in late May into the implications of automobile and auto parts imports to US national security.

The probe was based on a rarely-used Section 232 of the Trade Expansion Act, which can lead to the imposition of as high as 25 percent of tariffs on cars and auto parts imports.

Yonhap news agency reported that Section 232 was legislated in 1962 and had been a dead law until President Trump recalled it and caused controversy around the world.

Trump’s claim that imports negatively affect US national security can be arbitrary, Yonhap said.

Citing the same local law, the Trump administration imposed duties of 25 percent on steel imports and 10 percent on aluminum imports, respectively, in March in the name of national security.

The recent series of protectionist moves by the US president opened a door for trade war, a local daily Hankyoreh said. It said such moves provoked widespread oppositions from the US trading partners.

The unilateral moves could expose US companies to retaliations from foreign governments, while allowing the US trading partners to restrict American goods and services in the name of national security.

South Korea requested dispute consultations with the US in May at the World Trade Organization (WTO), claiming that US safeguard measures on South Korean washers and solar cells were inconsistent with a number of provisions under the WTO’s Agreement on Safeguards and the General Agreement on Tariffs and Trade (GATT).

The US government decided in January to levy tariffs of up to 50 percent on imported washers for the next three years, and up to 30 percent on solar cells and modules for the next four years.

Separately, South Korea had issued a complaint in February at the WTO, opposing the US use of anti-subsidy and anti-dumping duties relating to steel and transformer products.

If the US tariffs on imported cars and auto parts are imposed, Hankyoreh forecast, it would deal a big blow to the South Korean auto industry. Concerns spread that with the high tariffs, it would be actually impossible for local automakers to export their cars to the US market. Of the 2.53 million car exports of South Korea in 2017, 845,000 vehicles were exported to the US, taking up 33 percent of the total.

However, the high US tariffs on car imports would affect the US economy as higher duties would stoke higher car prices and fewer vehicle choices among US consumers.

Foreign investors dumped South Korean stocks worth $2.8 billion for the first five months of this year on rising worry about the US protectionist moves that can lead to a trade war, according to the Bank of Korea data. Foreigners bought $9.2 billion in domestic bonds. South Korea’s deficit in services trade with the US hit a record yearly high of $15.38 billion in 2017, topping the previous high of $14.09 billion tallied in 2015. The country posted a surplus of $39.99 billion in goods trade with the US in 2017, but it was the lowest since 2012.