'Double hit' triggers emergency for Korean exports… EU raises steel tariffs to 50%

Reduction of duty-free benefits

Following the United States, the European Union (EU) has decided to strengthen steel import controls to protect its domestic industry, which is expected to deal a direct blow to Korean steel.

The European Commission, the EU's executive body, formally announced a new regulation on July 7 (local time) to protect the European steel industry. According to the draft regulation, the annual duty-free import limit (import quota) for all imported steel products will be capped at a maximum of 18,300,000 t. This figure was calculated based on 2013 import volumes, before steel oversupply became widespread, and represents about a 47% reduction from last year's quota (30,530,000 t).

With the overall volume sharply reduced, country-specific import quota cuts, including for Korea, are expected to be inevitable. Quantities exceeding the quota will be subject to a tariff that rises from the current 25% to 50%.

The measure applies to all third countries except Norway, Iceland, and Liechtenstein. The EU said, "It is practically impossible to exclude FTA partner countries from the scope," adding, "FTA partners account for two-thirds of EU steel imports, and some of them contribute to global oversupply."

This initiative replaces the existing steel safeguard. The safeguard was introduced by the EU in 2018 in response to the Trump administration's imposition of steel tariffs by the United States; it applied zero duties within country-specific quotas and a 25% duty on excess volumes. Under World Trade Organization (WTO) rules, this scheme is scheduled to end in June next year, but the EU argues that follow-up measures are needed to protect the steel industry.

The EU is the largest export market for Korean steel. According to the Korea International Trade Association, Korea's steel exports to the EU last year amounted to 4,480,000,000 dollars (about 6,283,600,000,000 won), exceeding exports to the United States, the top single-country market, which totaled 4,347,000,000 dollars. If import quotas are reduced, Korean firms face restricted export volumes and increased tariff burdens.

Earlier in April, the EU partially reduced safeguard volumes and cut the Korean quota by up to 14%.

Experts say urgent measures are needed, such as thoroughly preparing negotiation strategies for import quotas. Meanwhile, the implementation timing remains fluid. For the draft regulation to take effect, it must go through legislative procedures, including negotiations between the European Parliament and the Council representing the EU's 27 member states.

Shin Hyun-bo, Hankyung.com reporter greaterfool@hankyung.com