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SEOUL, March 26 (Reuters) - South Korea's steelmakers rose sharply on Monday, with Dongbu Steel leading gains, ahead of a possible trade deal between Seoul and Washington.

Washington has said that the United States and South Korea could announce a trade deal this week that would cover an exemption from U.S. steel and aluminum tariffs and other trade issues.

South Korea's trade minister Kim Hyun-chong told reporters on Sunday that Seoul and Washington have agreed "in principle" on a free trade deal and steel tariffs, without elaborating. He plans to hold a briefing at 11:30 am Seoul time (0230 GMT).

Dongbu Steel shares surged as much as 21.8 percent and Husteel shares jumped 7.3 percent, before giving up much of their gains, while Seah Steel rose 5.5 percent.

Auto shares, which are also expected to be affected by any trade deal, moved tentatively with Hyundai Motor easing 0.3 percent and Kia Motors slipping 0.8 percent in a nearly flat broader market.

It was not immediately clear whether a deal would encompass a revamp of the 2012 U.S.-South Korea Free Trade Agreement, known as KORUS, which has been under negotiation for several months.

South Korea and the United States earlier this month held a third round of negotiations on revising the trade pact. Reducing South Korean non-tariff barriers to U.S. automotive exports has been a priority for the Trump administration.

Trump late on Thursday issued a proclamation that South Korea, Argentina, Australia, Brazil and the European Union would get temporary exemptions from steel and aluminum tariffs, along with Canada and Mexico's earlier exemptions. The exemptions run until May 1 as discussions continue. (Reporting by Dahee Kim and Hyunjoo Jin; editing by Richard Pullin)