(Washington AFP=News1) Reporter Woo Dong-myung: On the 2nd (local time), U.S. President Donald Trump defended an administrative order announcing reciprocal tariffs at the “Make America Wealthy Again” event held in the Rose Garden of the White House in Washington. He claimed that “today is one of the most important days in American history, an economic independence day.” Despite removing automobiles from the list of reciprocal tariffs, the automobile industry managed to avoid the worst-case scenario. However, with a 25% tariff soon to be imposed, the impact seems inevitable. The industry is concerned about the possibility of reduced export volumes and a direct negative impact on performance.
On the same day, President Trump announced the imposition of a 25% reciprocal tariff on South Korea. The White House added that certain items, such as steel, aluminum, automobiles, and semiconductors, would not be subjected to reciprocal tariffs.
The automotive industry’s greatest concern was facing double tariffs with the addition of reciprocal tariffs. Given that the U.S. comprises 51.5% of South Korea’s car export volume, such double tariffs could severely impact exports. The industry feared that if reciprocal tariffs were also imposed, exporting to the U.S. could become impossible.
While the worst was avoided, the automotive industry’s burden remains significant. President Trump stated that tariffs would apply if automotive parts are not produced in the U.S. In other words, any part not manufactured entirely within the U.S. would incur tariffs. Hyundai and Kia have been trying to increase local production in the U.S. since last year to avoid import tariffs. Including their new “Hyundai Motor Group Metaplant America (HMGMA)” factory completed in Georgia at the end of last year, they can produce up to a million units annually. However, it is impossible to source all required parts domestically. Some Hyundai affiliates like Hyundai Mobis and Hyundai Transys have plants in the U.S., but smaller parts suppliers find entering the U.S. market impossible, forcing them to procure over 30% of automotive parts from outside the U.S.
GM Korea, which exports over 80% of its production to the U.S., also faces challenges. It produces major SUV models such as the ‘Trailblazer’ and ‘Trax’ for export to the U.S. These models account for about 16% of GM’s U.S. sales. Relocating production to the U.S. is not feasible. Renault Korea, which planned to export its contracted vehicle ‘Polestar 4’ to the U.S. in the second half of the year, also found the situation challenging.
The industry predicts that vehicle prices in the U.S. will inevitably rise for those subjected to tariffs. According to Reuters and others, Randy Parker, CEO of Hyundai’s U.S. sales subsidiary, informed local dealers in a recent letter that “current car prices are not guaranteed, and may change for products wholesale after the 2nd.”
U.S. consumers, anticipating price hikes due to tariffs, rushed to purchase vehicles last month. Hyundai and Kia sold 172,669 units in the U.S. last month, a 13.4% increase over the previous year. Bloomberg and the New York Times reported that Ford’s sales increased by 19% over last year, while Toyota and Honda saw sales rise by 7.7% and 13%, respectively.
The automotive industry estimates that some models’ prices may need to rise by over $10,000 (approximately 14.7 million won) to offset the losses due to tariffs. An industry representative expressed concern that such price hikes could reduce overall demand in the U.S., impacting sales. With the U.S. being the largest revenue source for domestic automakers, a slowdown in sales could visibly affect performance from the second quarter onward.