President Donald Trump and South Korean President Moon Jae-In in 2017. Photo: Jung Yeon-Je / AFP / Getty Images
Senior administration officials said on Tuesday that the Trump administration has reached "an agreement of principle" with South Korea regarding the United States-Korea Free Trade Agreement (KORUS).
Why it matters, per the New York Times: "Mr. Trump used his threat of stiff steel and aluminum tariffs as a cudgel to extract the concessions he wanted, helping produce an agreement that had stalled amid disagreements this year."
More from the Times: "The deal, which could be formally announced on Wednesday, opens the South’s market to American autos by lifting existing limits on manufacturers like Ford Motor and General Motors, extends tariffs for South Korean truck exports and restricts, by nearly a third, the amount of steel that the South can export to the United States.
"An agreement of principle" essentially means that both sides have agreed to the broad principle of a deal, but haven't worked the technical details out yet. An administration official said when finalized, it will "be the first successful renegotiation of any trade agreement in U.S. history."
What the agreement includes, as of now:
- South Korea will be subject to a "hard annual quota" on steel products, as an alternative to the steel tariffs. The official said this will be "a product-specific quota, equivalent to 70% of the average annual export volume for steel products." The official added that this will result in around a 30% reduction in steel shipments from Korea to the U.S.
- A currency agreement, which will "prohibit competitive devaluation of currency, and ensure that there are commitments on transparency and accountability."
- Improving implementation issues, such as how South Korea "conducts its inspections at the border," and including U.S. companies in their reimbursement policy for innovative drugs.
- The 25% U.S. tariffs on pick-up trucks will be extended to 2041. The official called this a "big win for our U.S. truck producers and workers."
- "Eliminating burdensome regulations," like different environmental standards. The official said Korea will align "their environmental standards with the U.S.," for both vehicles and auto parts.
- Doubling the cap on auto exports, which originally allowed for 25,000 vehicle exports per year, per manufacturer, the administration official said, for vehicles "built to U.S. safety standards."