Domestic Automakers Likely to Increase Production in the U.S.
In the photo, export cars are lined up at Pyeongtaek Port in Gyeonggi-do. /Photo by Yonhap News.
On April 3rd (local time), a 25% tariff imposed by President Donald Trump on automobiles and major automotive parts manufactured outside the United States came into effect.
The 25% tariff, announced by President Trump on March 26th, was implemented at 12:01 a.m. Eastern Time on that day (1:01 p.m. Korean time on April 3rd).
The components subject to the 25% tariff include engines, transmissions, powertrains, and electrical components.
Consequently, from this point forward, cars and components produced in South Korea and exported to the U.S. will be subject to a 25% tariff.
This auto tariff is one of the item-specific tariffs imposed by President Trump since he took office on January 20th this year.
Automobiles are South Korea’s leading export to the U.S., and significant damage to domestic automakers is expected as a result.
Last year, South Korea’s automobile exports to the U.S. amounted to $34.744 billion (about 51 trillion won). This represents 49.1% of the global automobile export volume, including the U.S., which totaled $70.789 billion.
Last year, Hyundai Motor Group (Hyundai & Kia) exported about 970,000 vehicles, while Korea GM exported around 410,000 vehicles.
To mitigate the shock of the U.S. tariff bombshell, domestic automakers are expected to increase production within the United States.
Hyundai Motor Group Chairman Chung Eui-sun announced on March 24th at the White House that they would expand the production capacity of the ‘Hyundai Motor Group Metaplant America’ (HMGMA), their third U.S. plant in Savannah, Georgia, from the current 300,000 units per year to 500,000 units, securing a production system of 1.2 million units within the U.S.
Meanwhile, President Trump announced the previous day that he would impose ‘reciprocal tariffs’ by country but stated that these would not be additionally applied to the existing 25% tariffs on automobiles and parts.