U.S. President Donald Trump’s decision to impose a 25% tariff on all imported steel and aluminum products has reignited trade tensions and poses significant challenges for South Korea’s steel industry, a key sector of the nation’s economy.
Announcing the decision on Feb. 9, Trump justified the move as a measure to protect U.S. steelmakers, such as US Steel, which he said are threatened by cheaper imports and declining demand, jeopardizing jobs in the Rust Belt. The administration also framed the decision as essential for national security, citing steel’s strategic importance for both industrial and military applications.
South Korea, the world’s sixth-largest steel producer and the fourth-largest exporter to the U.S., faces unavoidable repercussions.
Already contending with sluggish demand from the construction and automotive sectors, as well as an influx of low-cost Chinese steel, South Korean steelmakers are bracing for further challenges. On Feb. 10, shares of major producers, including POSCO Holdings, Hyundai Steel, and Dongkuk Steel, declined sharply.
If last-minute negotiations fail, industry insiders say South Korean companies may be forced to establish production facilities in the U.S.
The U.S., a net importer of steel, relies heavily on foreign supply, with domestic production covering only about 90% of consumption as of 2023. In 2024, the U.S. imported approximately 28.86 million tons of steel, with Canada, Brazil, and Mexico accounting for nearly half of the supply. South Korea ranked fourth, providing 9.7% of the total.
The specifics of Trump’s tariff plan remain unclear, but experts speculate it could involve imposing a 25% duty on previously tax-exempt imports or raising the tariff to 50% on already-taxed products.
During Trump’s first term in 2018, South Korea secured an exemption from the 25% tariff by agreeing to a quota that capped annual exports at 2.63 million tons, a roughly 30% reduction from previous levels.
Trade experts foresee three potential outcomes:
- Applying a 25% tariff to the current 2.63 million-ton quota while maintaining the export cap.
- Removing the export quota but applying the 25% tariff.
- Reducing the quota further while maintaining duty-free access.
“If both the quota and tariffs are imposed, South Korean steelmakers will face significantly unfavorable conditions,” said Jang Sang-sik, a researcher at the Korea International Trade Association.
Hur Jung, a professor at Sogang University, suggested that Seoul could negotiate to maintain duty-free access by agreeing to further quota reductions.
A Ministry of Trade, Industry and Energy official said the government will closely monitor developments and work with industry stakeholders to minimize the impact on South Korean companies.
If China’s current steel exports to the U.S., estimated at around 500,000 tons, are blocked by the tariff, there are concerns that the surplus could flood nearby markets, including South Korea.
South Korean steelmakers are already preparing contingency plans. Hyundai Steel is reportedly considering a multi-billion-dollar investment to build its first U.S. plant, possibly in Louisiana, to supply automotive steel to Hyundai and Kia plants in Georgia. POSCO is also exploring the possibility of building a blast furnace or electric furnace to establish a direct production base in the U.S.
However, setting up production facilities in the U.S. faces challenges due to high construction and labor costs, compounded by currency fluctuations.
“Blast furnaces require skilled maintenance personnel, but it’s difficult to find experts locally,” an industry official said. “That’s a major obstacle we’re trying to address.”
