SEOUL • The United States and South Korea agreed to revise a trade pact sharply criticised by US President Donald Trump, Seoul said, with US carmakers winning improved market access and Korean steelmakers hit with quotas, but avoiding hefty tariffs.
The planned changes in the US-Korea Free Trade Agreement (Korus) were seen as limited, leaving South Korea's key passenger car exports untouched and helping soothe fears that Mr Trump's tough approach could start a spiralling global trade war.
In April last year, Mr Trump told Reuters that he would either renegotiate or terminate what he called a "horrible" trade deal that has doubled the US goods trade deficit with South Korea since 2012.
Asian shares steadied yesterday, stemming last week's hefty losses after Mr Trump's action on steel and aluminium, and his plans to impose tariffs on up to US$60 billion (S$78.7 billion) in Chinese goods.
South Korea is the third-largest steel exporter to the US and the world's top importer of Chinese steel, leading to concerns that it was a conduit for China's excess capacity.
The agreement reached yesterday means South Korea will be forced to cut its steel exports to the US by 30 per cent of the past three years' average, in exchange for becoming the first US ally to receive an indefinite exemption on steel tariffs.
US carmakers will be able to bring into South Korea 50,000 vehicles per carmaker per year that meet US safety standards, not necessarily Korean standards, up from 25,000 vehicles previously.
"We had heated discussions," South Korean Trade Minister Kim Hyun Chong said at a media briefing in Seoul. "The latest agreement removed two uncertainties," he said, referring to steel tariff exemptions and the Korus renegotiation.
The revisions set a "bad pre-cedent", said law professor Choi Won Mog of Ewha Womans University.
"This leaves a bad precedent of exchanging steel tariffs - which is a breach of international trade law - for a legitimate free trade agreement in negotiations," he said.