Korea’s steel heartland frets about looming US tariffs
POHANG, South Korea: The air in Pohang is thick with steel dust and anxiety.
No place in South Korea has more to lose from President Donald Trump’s tariffs on steel imports than this industrial city on the country’s southeast coast.
“Of course I am worried about the tariffs, It’s starting to take a toll on my daily life,” said Kim Young-ho, a 37-year- old steel worker who was born and raised in Pohang, the birthplace of South Korea’s steel industry and home to huge producers like Posco and Hyundai Steel.
This is Steel City. One of the major arteries through the city is “Steel Road,” workers stop off to eat at the “Steel Chinese Restaurant,” and the Pohang soccer club is named the “Steelers.”
But the city was already struggling amid increasing competition from Chinese steel makers, and the effects of a highly unusual 5.4-magnitude earthquake that struck last November.
Kim works at Nexteel, a midsize steel company that used to export 80 per cent of its annual output of 716,000 tons to the United States. Most of its exports are steel pipes for the American energy sector. Because of its reliance on exports to the United States, Nexteel would be much harder hit than the more diversified giants.
Kim had been working at the company for eight years when it was hit by American antidumping tariffs in 2016, levies that have now risen to 30 per cent and could possibly increase to 46 per cent next month. These are separate from the tariffs Trump has announced.
So that year, Kim decided to leave the steel industry and try his luck in Seoul.
He lasted a year in the capital, working at a jewellery store, but it wasn’t for him.
He returned to the production line at Nexteel last year, where his job is to cut steel pipes.
He hadn’t been back long before the specter of new, even tougher tariffs arose.
Trump has now turned those fears into reality, announcing this month that South Korea will be among the countries whose steel exports to the United States will be subject to a 25 per cent tariff.
The tariffs are scheduled to take effect Friday, and would be added to the existing antidumping tariffs.
That means Nexteel could be facing a 70 per cent levy on the steel tubes it sends to the United States.
South Korea’s government is frantically trying to persuade the Trump administration to exempt it from the tariffs, not least because the two countries are allies in a fraught part of the world. Indeed, Trump announced the tariffs on the same day that he met South Korea’s national security adviser at the White House and immediately agreed to a summit with North Korean leader Kim Jong Un.
South Korean Trade Minister Kim Hyun- chong met US Trade Representative Robert E. Lighthizer again recently, making another appeal for the country to be exempted.
Those pleas have so far fallen on deaf ears.
The South Korean representatives also brought up the issue with their American counterparts during a third round of negotiations last week on revising the 2012 KoreaUS Free Trade Agreement, which Trump has slammed as a bad deal that unfairly benefits South Korea at the expense of American workers.
They took issue as well, according to local reports, with Trump’s decision to impose tariffs on washing machines and solar panels, both of which South Korea exports to the United States. South Korea’s central bank governor said Friday that US protectionist measures were already expected to lead to a slight - 0.3 per cent - reduction in exports this year.
“But the impact may be greater if Washington confirms its plans to impose tariffs on steel and aluminium imports and intensifies trade pressure on South Korea,” Lee Ju-yeol told a parliamentary hearing.
Those on the factory floor are trying to keep their hopes up.
“There’s not much that we can do except hope that this whole trade relations thing with the US will turn back in time to the good old days,” said Yim Hwangbin, Nexteel’s deputy general manager.
The company, which employs 300 people at its plants in Pohang and in nearby Gyeongju, is also scrambling to counteract the new measures.
The company’s chief executive, Park Hyo-jung, plans to move part of Nexteel’s production to Houston to counteract the tariffs before the end of this year.
“Building a factory in the US would be the last resort,” Park told the Korean Economic Daily. But that last resort is looking increasingly like the only option.
Nexteel has offered workers here the opportunity to move to the United States. But Kim, who was wearing a Chicago Bulls baseball cap, doesn’t want to go.
“A staff meeting was recently held at our factory about the newly planned Houston location. But I am not interested in moving there,” Kim said one recent night, after finishing a 12-hour shift. Life in the United States would be “too expensive,” he said.
In addition to the Houston plant, Nexteel had planned to build a factory in Thailand. But it put that plan “on hold indefinitely” last month when Thailand, along with South Korea, was included in the list of countries subject to the steel tariffs.
Amid all the uncertainty, Kim already knows one thing for sure. The tariffs and the company’s relocation plans are going to have an immediate impact on his livelihood in South Korea.
The factory currently operates two 12-hour shifts, with workers like Kim being paid overtime for the final four hours. Working 12hour shifts full time, Kim earns about US$ 2,800 ( RM10,640) a month.
But starting last week, hours will be cut dramatically. Most workers will move to eight-hour days and lose those lucrative overtime payments. — WPBloomberg