* US imposes steel import quota of 70 pct of 3-yr average
* South Korea is 3rd largest steel exporter to US
* S.Korean steelmaking firms rally on deal hopes (Add trade minister comments)
SEOUL, March 26 (Reuters) - The United States on Monday agreed to exempt South Korea from steel tariffs, instead imposing a quota on steel imports as the two countries agreed in principle to revise a trade pact sharply criticised by U.S. President Donald Trump.
In return, South Korea said it would improve access for U.S. automakers under the bilateral free trade deal known as KORUS, the country's trade ministry said.
In April, Trump told Reuters he would either renegotiate or terminate what he called a horrible trade deal that has doubled the U.S. goods trade deficit with South Korea since 2012.
The agreement means South Korea becomes the first U.S. ally to receive an indefinite exemption, albeit with a quota, on steel tariffs imposed by Trump.
Trump's action on steel and aluminium, along with plans to slap tariffs on up to $60 billion in Chinese goods had fuelled concerns of a damaging global trade war.
"We had heated discussions," South Korean Trade Minister Kim Hyun-chong said at a media briefing in Seoul. "The latest agreement removed two uncertainties, he said, referring to steel tariff exemptions and KORUS renegotiation.
Last week, Trump temporarily excluded six trade partners, including Canada and Mexico, Australia and the European Union from higher U.S. import duties on steel and aluminium which came into effect on Friday.
The import duties, of 25 percent on steel and 10 percent on aluminium, were mainly aimed at curbing imports from China.
South Korea has received a quota of about 2.68 million tonnes of steel exports, or 70 percent of the annual average Korean steel exports to the United States between 2015-2017, which will be exempt from the new tariffs, the ministry said in a statement.
South Korea is not allowed to export steel products exceeding that quota to the U.S. market, a ministry official said, saying U.S. is "restricting import volume."
South Korea is the third-largest steel exporter to the United States and the world's top importer of Chinese steel, leading to concerns it was a conduit for China's excess capacity.
TRADE WAR FEARS
Trump was elected in 2016 after promising to punish what he saw as unfair trade practices by other countries, particularly China.
Alarm over a possible trade war between the world's two largest economies has chilled financial markets as investors foresee dire consequences should trade barriers go up.
Shares in South Korean steelmakers rallied sharply on Monday, with Dongbu Steel leading gains, on expectations of tariff exemptions.
South Korea's steel association said in a statement it was a "relief" that South Korea has been excluded from U.S. steel tariffs, but it was regrettable it was unable to secure higher quotas for steel exports.
South Koreas steel industry will "try to pave the way to ease U.S. restrictions on steel exports," the association said in a statement.
South Korea and the United States also agreed that U.S. tariffs on Korean pickup trucks will remain in place until 2041, extended by 20 years from the previous phase-out schedule of 2021.
Under KORUS revisions, U.S. automakers will be able to bring into South Korea 50,000 vehicles per automaker per year that meet U.S. safety standards, not necessarily Korean standards, up from 25,000 vehicles previously.
Kim said no automakers previously exceeded the 25,000-vehicle threshold a year. Ford Motor Co and General Motors each shipped fewer than 10,000 vehicles from the United States to South Korea last year.
"I don't see a high chance of automakers expanding U.S. imports," he said.
South Korea also said it will "take into account U.S. standards and global trends" when Seoul decides its fuel economy and emissions rules from 2021 to 2015.
South Korea gave concessions in autos in return for steel tariff exemptions, former chief negotiator for the KORUS FTA, Kim Jong-hoon, told Reuters. I think South Korea fared well despite the U.S. offensive.
South Korean automakers should make investments and hire new workers in the United States to build pick-up trucks to avoid the 25 percent tariff, he added.
This is not a free trade, but a managed trade. (Reporting by Joyce Lee and Hyunjoo Jin; Additional reporting by Christine Kim Editing by Lincoln Feast)