EU halves duty-free steel quota, US threatens new tariffs — 'This is the last chance to stop it'

South Korea is bracing for a double wave of protectionist tariffs — one from the United States under Section 301 of the Trade Act and another from the European Union, which plans to sharply raise steel duties and slash duty-free import quotas starting next month.

According to the Ministry of Trade, Industry and Energy on Sunday, the Office of the United States Trade Representative announced June 2 that it plans to impose additional tariffs of either 10 percent or 12.5 percent on imports from 60 economies that have failed to prevent trade in goods produced with forced labor. The new duties are expected to take effect next month.

South Korea was placed in the higher-tariff group of 46 economies — cited for failing to effectively enforce import bans on goods produced through forced labor, including so-called salt farm slavery and illegal fishing — and faces the 12.5 percent rate. The remaining 14 economies were assigned the 10 percent rate.

The Donald Trump administration is moving quickly to replace the 10 percent "global tariff" it imposed on trading partners worldwide after a court struck down the reciprocal tariffs in February. That baseline tariff expires July 24, and Section 301 is the administration's chosen vehicle for a successor measure.

The USTR plans to finalize the new tariffs after a public hearing and comment period scheduled for July 7.

South Korea pledged $350 billion in investment in the United States last year and secured a reduction in reciprocal tariffs from 25 percent to 15 percent. If the 12.5 percent forced-labor tariff is confirmed, the total duty burden would approach that 15 percent threshold agreed upon last year.

The figure could climb further if an additional tariff emerges from a separate Section 301 investigation into overcapacity, the results of which Washington is expected to announce soon. That would push the effective rate above 15 percent.

The government said it intends to prevent South Korea's total tariff burden from exceeding the 15 percent level agreed with the United States last year.

Experts urged the government to respond aggressively — including compiling thorough documentation by July 6 to prevent the overcapacity probe from becoming an additional trade flashpoint.

"South Korea needs to actively correct misunderstandings by explaining where the facts differ or where the US assessment is wrong regarding the forced-labor allegations," said Lee Jae-min, a professor at Seoul National University School of Law and a former chair of the Korea Trade Commission.

The EU threat is equally pressing. Starting July 1, the bloc will cut the annual duty-free import quota for steel products from 35 million metric tons to 18.3 million metric tons — a reduction of nearly half — to protect its domestic steel industry. Any imports above that threshold will face a tariff of 50 percent, double the current 25 percent rate.

The EU was South Korea's largest steel export market last year, accounting for 13.8 percent of total steel exports, or 3.884 million metric tons.

Of the roughly 3.11 million metric tons of safeguard-covered steel products South Korea shipped to the EU last year, 2.58 million metric tons entered duty-free under country-specific quotas, while the remainder was subject to the 25 percent tariff.

Under the new EU rules, South Korea's duty-free quota would shrink to roughly 1.3 million metric tons — about half of last year's level — and any volume above that would be hit with the 50 percent tariff.

With the United States already having raised its steel tariff to 50 percent last year, a similar move by the EU would deal a severe blow to South Korea's steel industry.

In response, Trade Minister Yeo Han-koo met EU Trade and Economic Security Commissioner Maros Sefcovic in Brussels on June 1 for a second time — following an earlier meeting on May 11 — to convey the Korean steel industry's concerns over the EU's import restrictions and to request that South Korean steel products not face unreasonable constraints.

Yeo met Sefcovic again on Thursday, on the sidelines of the OECD Ministerial Council Meeting at the OECD headquarters in Paris, pressing the EU side to preserve as large a duty-free quota as possible for South Korea.

With those high-level contacts yet to yield a breakthrough, the steel industry and trade experts are looking to President Lee Jae Myung's upcoming European tour as the last opportunity to head off the EU tariff blow.

Lee will travel to Europe from Tuesday through June 18 to attend the G7 summit and is scheduled to spend two days in Brussels starting Tuesday, where he will hold summit talks with EU leaders.

"South Korea and the EU have been working together to push back against the United States' unilateral tariff measures," said professor Lee Jae-min. "It is deeply disappointing, from South Korea's perspective, to see the EU now moving in a direction similar to the US."

"Unlike other countries, South Korea has a free trade agreement with the EU and has built up extensive cooperation with the bloc," he added. "We need to emphasize that treating South Korea the same as every other country is not appropriate. I believe this is the last chance."