The two countries reached an agreement “in principle” on the trade deal, the South Korean trade ministry said in a statement yesterday.

To avoid the steel tariff, South Korea would limit US shipments of the metal to about 2.7 million tonnes a year, the ministry said.

It also agreed to double to 50,000 the number of US cars that could be imported without meeting local safety standards.

Korea’s trade surplus with the US was about $18bn last year, down from $23bn in 2016, according to the Korea International Trade Association. Cars accounted for more than 70% of the value of the surplus.

The finance ministry said the steel quota is unlikely to hurt the country’s exports since sales to the US only account for 11% of total overseas shipments of the metal.

The quota is set at 70% of the average steel sales to the US during 2015 to 2017.

The OECD warned earlier this month that the rise in protectionism and trade wars could harm the global economic growth.

Cecilia Malmstrom, European Union commissioner for trade, also said the bloc will “stand up to bullies” that create trade wars, at a conference in Brussels.

She said: “Recently we have seen how [trade] is used as a weapon to threaten and intimidate us. But we are not afraid, we will stand up to the bullies.”

She made the statement after Donald Trump signed an order imposing a 25% tariff on steel imports and 10% on aluminium. Trump confirmed at the beginning of the month that his commerce secretary would be in contact with EU representatives about the matter.

European leaders believe they should be exempt from the tariffs and have threatened retaliation if the plan goes ahead.

Trump insisted there would be a fair process of negotiation, including talks of exemptions. Canada and Mexico have already been exempt from the tariffs.