US Department of Commerce, Reduces Tariffs on European Cars from 27.5% to 15%
Korean Cars Continue at 25%… Decreased Competitiveness in US Market
On the 24th (local time), the United States government finalized the tariff rate for European cars and auto parts at 15%. With both European and Japanese car manufacturers receiving the 15% tariff, Hyundai and other companies, which still face a 25% tariff, find themselves at a disadvantage in the US market.
The US Department of Commerce and the US Trade Representative (USTR) released this information ahead of the official publication in the gazette on the 25th. Following the completion of trade negotiations with Japan, which saw their car tariff rate set at 15%, Europe will also receive the 15% rate. This puts pressure on South Korea, currently with a 25% tariff, to expedite its trade negotiations.
The revised tariff rates are retroactively effective from August 1. Companies that paid tariffs higher than 15% after this date are eligible for refunds. According to the pre-disclosed information, the import tariff on European cars will be retroactively adjusted from the current 27.5% to 15% as of August 1.
However, this is contingent on the European Union (EU) first abolishing tariffs on US manufactured goods and preparing legislation to offer preferential access to certain US agricultural and seafood products in the European market. The EU announced a draft of this legislation on the 28th of last month, completing preliminary steps for the tariff reduction.
The US and EU issued a joint trade agreement statement on the 21st of last month regarding the 15% tariff on European cars and parts. US President Donald Trump promised reciprocal tariff adjustments with the EU via an executive order on the 5th.
The announcement also includes exemptions for tariffs on some pharmaceutical ingredients and aircraft parts, effective from September 1.
South Korea had agreed in July to reduce its car tariffs from 25% to 15%, in talks with the US. However, the subsequent negotiations have delayed this implementation, and the 25% tariff remains.
In an interview with Reuters on the 22nd, President Lee Jae-myung expressed the goal of resolving the tariff issues between South Korea and the US as quickly as possible. He pointed out disputes about the commercial viability of South Korea’s $350 billion (approximately 490 trillion won) investments in the US, adding, “If the funds were withdrawn as cash and invested to meet US demands without a currency swap agreement, South Korea could face a crisis similar to the 1997 financial crisis.”
President Lee explained the difference in circumstances between South Korea and Japan, referencing Japan’s foreign reserves and documented trade agreements with the US. He highlighted that while South Korea and the US have discussed making projects commercially viable, they struggle to coordinate detailed aspects.
Regarding whether the negotiations might continue into next year, President Lee stated, “We must end this unstable situation as soon as possible.” When asked about abandoning the trade agreement with the US, he emphasized, “I believe we can maintain at least the minimum rationality between allies.” Reporter Kim Soo-han.