South Korean automakers — particularly, Hyundai Motor Group and GM Korea — are expected to face a decline in their US exports after Donald Trump announced 25 percent auto tariffs on all imports starting next week.
“What we’re going to be doing is a 25 percent tariff on all cars that are not made in the US,” Trump said at the White House on Wednesday local time. He further noted that the tariffs are scheduled to take effect on Apr. 2 and the US government plans to collect them the following day, emphasizing that it had no interest in negotiating any exceptions.
According to the White House, the import taxes would apply to automobile parts such as engines, transmissions, powertrain parts and electrical components, as well as fully assembled cars. It said it could add to the number of affected auto parts over time.
Trump’s nonnegotiable tariff announcement came on the same day as the Korean auto giant’s opening ceremony of Hyundai Motor Group Metaplant America in Georgia, its third production base in the US. Hyundai Motor Group’s Seoul headquarters declined to comment on the matter, citing the sensitivity of the issue.
“Hyundai Motor had hoped for a delay in the tariff imposition, given their multibillion-dollar investment and the official opening of the Georgia plant,” said a source close to the matter who wished to remain anonymous. “But apparently, this was not enough to sway Trump.”
The auto tariffs are expected to have a substantial impact on South Korea, as automobiles take up the largest portion of its exports to the US.
Last year, Korea exported automobiles worth $34.74 billion to the US, accounting for 49.1 percent of its global car exports. In the same period, Hyundai Motor and its smaller sibling Kia exported approximately 970,000 vehicles, which represented 54.2 percent and 34.8 percent of their total exports, respectively. GM Korea shipped around 410,000 vehicles, accounting for 84 percent of its exports.
Experts say that despite Hyundai Motor’s strong commitment to expanding US production facilities, Trump will likely maintain a firm stance on tariffs for at least a while.
“Trump has to prove that he is serious about his trade policy, particularly toward China and India,” said Kim Tae-hwang, an international trade professor at Myongji University.
“Korea and other allies are caught in the crossfire while Trump seeks to take control over the two countries, which pose great threats to the American economy. In the worst-case scenario, vehicle tariffs could stick for at least one or two months.”
Kim projected that Trump cannot insist on the heavy duties “permanently,” as it would be a self-defeating move that could disrupt US manufacturers that export to the US, resulting in supply shortages there. This could lead to a sharp increase in local car prices and negatively affect the domestic economy.
Following Trump’s announcement, the stock prices of US automakers, including Tesla and General Motors, dropped, while the Nasdaq saw a 2.04 percent decline from the previous trading day.
Notably, GM’s Korean unit, which relies on exports to the US compared to other local carmakers — Renault Korea and KGM — might seriously consider pulling back from Korea.
“Unlike Hyundai Motor Group, GM Korea has little to offer to Trump,” said Kim Pil-su, a car engineering professor at Daelim University. “As it did in 2018, the company might demand more financial support from the Korean government or threaten to withdraw from the Korean market. If they do, it could trigger a ripple effect, leading to bankruptcies among auto parts suppliers to GM Korea.”
Meanwhile, Hyundai Motor and Kia’s stock prices fell at the closing bell by 4.38 percent and 3.45 percent to 212,500 won ($145) and 97,900 won, respectively, compared to Wednesday at the Kospi, the nation’s main stock exchange.
hyejin2@heraldcorp.com
