By William Mauldin in Washington and Kwanwoo Jun in Seoul 

U.S. officials said they are close to a deal with South Korean counterparts on amending an existing trade agreement between the two countries and resolving a dispute about steel and aluminum imports.

"We believe we are relatively close to a resolution" with the South Korean government," Commerce Secretary Wilbur Ross said at the White House in a news briefing with President Donald Trump.

Mr. Trump has threatened to pull out of the U.S. free-trade agreement with South Korea, known as Korus, unless Seoul agrees to amend the deal in ways that better balances trade between the two countries.

Besides the broader trade talks, the officials in Washington are discussing concerns about metals trade with South Korea, which is the top importer of Chinese steel and a major exporter to the U.S.

Late Thursday the White House temporarily exempted South Korea, along with some other countries, from global steel and aluminum tariffs Mr. Trump is imposing on national-security grounds starting Friday. Initially, U.S. officials named only Canada and Mexico as countries that would get exemptions.

Mr. Ross and U.S. trade representative Robert Lighthizer are working with those countries on arrangements that would allow permanent exemptions from the tariffs. A spokeswoman Mr. Lighthizer's office, which is leading the negotiations with South Korea, didn't immediately elaborate on the prospective deal.

South Korea's trade minister, Kim Hyun-chong, has been in Washington all week trying to work out terms of a revised deal. Mr. Lighthizer expressed confidence Wednesday at a congressional hearing, saying: "I think we're down to the last few issues."

Officials in Seoul echoed that optimism, but disputes remain in the broader talks, particularly about cars. More than 70% of South Korea's surplus in goods trade with the U.S. comes from car exports, according to South Korea's trade ministry.

South Korea no longer imposes tariffs on U.S. passenger cars and is phasing them out on pickup trucks, but U.S. auto makers say nontariff barriers remain, such as the requirement that cars must have a yellow taillight.

The current free-trade deal allows U.S. auto makers to bring in up to 25,000 vehicles each year if they meet U.S. safety standards, even if they don't meet the Korean ones. U.S. negotiators are asking South Korea to lift the remaining tariffs and remove the quota, according to people familiar with the issue.

South Korea's car market is still dominated by local brands Hyundai Motor Co. and its affiliate, Kia Motors Corp. Imports make up 15% of the market, and U.S. auto makers, while growing, have just 1% of that market share.

While South Korean steel exporters got a temporary reprieve from U.S. tariffs, some of them are nonetheless preparing for the worst by curtailing production or shipments. The steel industry in South Korea -- the third-largest supplier to the U.S. after Canada and Brazil -- is a case study in how companies outside the U.S. have been buffeted by uncertainty over the prospects for avoiding Mr. Trump's tariffs of 25% on steel and 10% on aluminum.

Husteel Co., a South Korean mill specializing in steel pipes for oil wells, said it has switched off one of its seven production lines at its Dangjin plant on the country's west coast since early March, anticipating that the products might face U.S. tariffs by the time they were delivered. The company said 70% of its exports go to the U.S., and the 25% tariff would come on top of already existing 16% anti-dumping duties imposed previously on Husteel products.

"Few would be able to survive the combined 40% tariffs. The more you export there, the more you lose," a Husteel official said.

Dongguk Steel Mill Co., a South Korean producer of bars, plates, beams and other steel products, said American customers stopped placing new orders after the tariff announcement. Some 20% of the company's total exports go to the U.S. The company said it decided to cease shipments to the U.S. beginning in April.

"The monthlong temporary relief does not make any big difference," a Dongguk official said Friday. Another company official said it was searching for alternative markets in the Middle East, Japan or elsewhere.

The U.S. has expressed concern that South Korea serves as a conduit for inexpensive Chinese metal to enter the U.S., but Seoul says steel exports using Chinese raw materials account for only 2.4% of U.S.-bound shipments.

One reason it is hard to make forecasts is that the steel issue is now part of the bigger U.S.-South Korea renegotiations over their free-trade agreement, which Mr. Trump has denounced as "horrible deal."

Japan's experience in negotiating with the U.S. shows how trade talks can stumble. It lobbied hard for a tariff exemption as a close U.S. ally, but got shut out in Thursday's decision.

Write to William Mauldin at william.mauldin@wsj.com and Kwanwoo Jun at kwanwoo.jun@wsj.com

 

(END) Dow Jones Newswires

March 23, 2018 15:06 ET (19:06 GMT)

Copyright (c) 2018 Dow Jones & Company, Inc.