“I think we're going to produce more than 30 percent less this year than we did last year. It's a disaster for small businesses.”

A head of Company A, which exports $5 million worth of bolts and nuts to the U.S., said, “If we export to the U.S., the price will go up by 25 percent, which will make us much less competitive. We have not received any new orders since February.” The business situation is deteriorating, but there is no obvious solution. Domestic demand has been sluggish for a long time, and the domestic market has been eroded by low-cost Chinese nuts. “I'm afraid of what will happen if the U.S. starts imposing reciprocal tariffs,” he said.

U.S. President Donald Trump speaks at the U.S. Capitol in Washington, D.C., on March 4. Yonhap News.

Korea's trade surplus in steel-related products, where U.S. President Donald Trump imposed tariffs on March 12, has been nearly $5 billion over the past three years. Steel-related products, such as bolts, nuts, and chains, were not subject to tariffs at the time of Trump's first term, but have been hit by the “tariff blow” this time. In particular, it is pointed out that most of the companies involved are small and medium-sized enterprises, so they are less able to respond to the “tariff blow.” Add to this, the U.S. reciprocal tariffs (estimated at 10 to 20 percent), which are scheduled to be announced on April 2nd (local time), and the “red light” is expected to be on for Korea's steel-related exports.

According to the Korea International Trade Association (KITA)’s export statistics analyzed by the Kyunghyang Shinmun on March 31, the surplus in Korea's trade balance with the U.S. brought by 167 steel-related products, which the U.S. has imposed tariffs on since March 12, was $1.634 billion last year. This is about 70 percent of the trade surplus with the U.S. ($2.464 billion) of steel products last year. This means that Korea was running a trade surplus in steel-related products as well as steel.

The trade surplus in steel-related products, which the Trump administration has imposed tariffs on, has increased sharply in recent years. From around $800 million in 2020, the surplus exceeded $1 billion in 2021 and has been around $1.6 billion in each of the last three consecutive years. With the 25 percent tariffs on these products, the trade surplus with the U.S. is likely to decrease significantly.

In the case of steel-related products, small exporters are subject to huge damage because most of the companies that process and export such products are small businesses. While large companies such as POSCO and Hyundai Steel are considering options like building steel mills or establishing joint ventures in the U.S., small and medium-sized enterprises are having difficulty checking whether their products are subject to tariffs. The U.S. item classification system is also different from that of Korea.

Adding to the confusion is the lack of guidance on how to value steel content. The U.S. announced a 25 percent tariff rate for most items, but only said it would set the tariff rate based on the steel content of auto parts, such as bumpers and bodies, home appliance parts, aircraft parts, and machinery. It is also difficult to estimate how much damage will be caused by the tariffs.

According to a survey of 600 steel, aluminum, and derivatives exporters released by the Ministry of SMEs and Startups and the Korea Federation of Small and Medium Business (KBIZ), 42.8 percent of small and medium-sized exporters said that their “exports and sales were affected by the imposition of U.S. tariffs.” They cited “difficulty in identifying accurate tariff policies” and “rising logistics costs” as difficulties.

“Unlike steel and aluminum companies, the majority of companies producing steel derivative products are small and medium-sized companies,” said Jang Sang-sik, head of the KITA’s International Trade Institute. ”They are expected to face difficulties in responding to the U.S. tariff risks, so government support is urgently needed.”