Trump administration is feeling upbeat about successfully reworking a trade deal with South Korea to US advantage which is an apparent proof about Trump’s promise and belief of America First on US trade policy which also includes a staunch carrot and stick style.
The agreement is unique as it also highlights the inabilities of the previous governments to strike a fair and reciprocal trade deal. White House has stated that the current agreement will completely revamp US-South Korean trade relations. South Korea not only agreed to curtail its steel exports to the US but also agreed to take many steps to open its market to US companies. The Trump administration thus exempted South Korea from the 25 percent steel tariffs.
The strategy of threatening with tariffs in return for some concessions may work with some nations but in dealing with China which is the largest trade partner of US, the strategy may not work well. US is faced with another challenge of reworking the NAFTA agreement. The South Korean trade deal has only increased pressure on NAFTA members to renegotiate a deal which will completely rule out the incentives of job outsourcing and may add robust labour and environmental standards with early enforcement.
The US had a deficit in trade with South Korea to the tune of $22.9 billion in 2017 and the new deal is expected to significantly reduce the gap. The new deal allows US automakers to ship 50,000 cars which are in line with US safety standards than meeting South Korean auto requirements. In addition, US has also won the right to maintain the 25 percent tariff on imported trucks for 20 years above the scheduled limit of 2021. No South Korean company exports trucks to the US.