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US and South Korea to revise trade pact with currency side deal

  • The U.S. and South Korea have agreed on a revised trade pact that provides relief from U.S. tariffs on steel.
  • South Korea's steel exports to the U.S. will fall by about 30 percent under the deal.
  • It includes a side deal aimed at deterring competitive currency devaluation by Seoul.
U.S. President Donald Trump talks with South Korean President Moon Jae-In at the presidential Blue House on November 7, 2017 in Seoul, South Korea.
Chung Sung-Jun | Getty Images
U.S. President Donald Trump talks with South Korean President Moon Jae-In at the presidential Blue House on November 7, 2017 in Seoul, South Korea.

The United States and South Korea have reached agreement on a revised trade pact that includes a side deal aimed at deterring competitive currency devaluation by Seoul and provides relief from U.S. tariffs on steel, senior Trump administration officials said on Tuesday.

South Korea's steel exports to the U.S. will fall by about 30 percent, but the Asian country is still subject to a 10 percent aluminum tariff.

The officials told reporters that the deal includes provisions outlined by South Korean officials on Monday, including a 20-year extension of the 25 percent U.S. tariff on pickup trucks and a doubling of the Korean import cap on autos that meet U.S. specifications to 50,000 per manufacturer per year.

The agreement, cobbled together quickly with only a few rounds of negotiations under Trump's threat of withdrawal, will include a side-letter that requires South Korea to provide increased transparency of its foreign exchange interventions, with commitments to avoid won devaluations for competitive purposes.

The currency deal, final details of which are still being negotiated between the U.S. Treasury and South Korea's Ministry of Strategy and Finance, is considered a "side letter" that will not be enforceable with trade sanctions.

Many U.S. lawmakers, particularly Democrats, had opposed the 2015 Trans-Pacific Partnership trade deal because it had a similar currency manipulation side agreement that could not be enforced. The revised KORUS will be the first U.S. trade deal with a currency side deal.