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The renegotiation of KORUS is in line with one of President Trump’s main campaign promises to negotiate trade deals that he believes are fairer to the United States. Currently, South Korea is the United State’s sixth largest trading partner. As of 2016, the U.S. had a $17 billion trade deficit with South Korea, something the White House mentions as part of the motivation to renegotiate this deal.
The auto industry is central to many aspects of the new KORUS agreement. Under the new terms, each American auto exporter will be able to increase the number of cars they export annually to South Korea from 25,000 to 50,000. The deal also extends a 25% U.S. tariff on Korean trucks that are imported. In return, the U.S. has agreed to exempt South Korea from the 25% tariff on global steel. However, a quota was put in place, limiting the amount of South Korean steel imported to the U.S. at 70% of what it was before.
It remains to be seen if the new caps on U.S. auto exports will help cut into the trade deficit. A study done by the American Automative Policy Council demonstrated that in 2016, Americans imported $16 billion of Korean cars as compared to $1.5 billion worth of American cars sent to Korea. Prior to the renegotiation, most American auto manufacturers were not reaching the 25,000 cap on car exports annually, so it is unlike for the cap being lifted to impact the trade deficit too drastically.
On a whole, there are not many substantial changes in the new version of KORUS. A new deal however, has let President Trump have a signing ceremony and tout this agreement as “deal that’s fair for the United States and fair for South Korea.”
Trade agreements have a significant impact on the business relationships between countries and thus the relocation of individuals between not only the countries involved in the agreement but others as well. Depending on the terms of a renegotiated agreement, companies could make shifts in the locations of their operations and personnel in the U.S., South Korean and around the globe.
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