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On May 22, 2018, President Donald Trump welcomed South Korea’s President Moon Jae-In at the White House, highlighting the importance of U.S.-South Korea relations. As trade tensions escalate, Trump is considering further increasing tariffs on various trading partners, a move that could have significant repercussions for the auto industry, particularly those importing vehicles from South Korea and Japan.
According to recent data from GlobalData, these East Asian nations accounted for 16.8% of all vehicles sold in the U.S. last year, with South Korea contributing a record 8.6% and Japan 8.2%. This positions them as the largest vehicle importers to the United States after Mexico, which faces a starkly different tariff structure compared to what Trump has threatened for Canada and Mexico.
Major automakers such as General Motors and South Korea’s Hyundai Motor are currently benefitting from tariff-free exports from South Korea. The country has stepped up to become the second-largest exporter of new vehicles to the U.S., surpassing Japan and Canada, and is only behind Mexico, which held 16.2% of U.S. auto sales in 2024, according to the same GlobalData report.
Jeff Schuster, global vice president at GlobalData, noted that “Hyundai has a massive amount of exposure” in this trade landscape, closely followed by GM, which relies on significant volume models. However, he suggested that the potential impact of new tariffs might be largely confined to these two automakers.
Currently, vehicles imported from Japan face a 2.5% tariff, a small rate that nonetheless adds to costs for automakers like Toyota, Nissan, and Honda, which sold around 1.31 million vehicles in the U.S. last year. Japan’s share of the U.S. auto market has been declining, while South Korea’s exports have surged from under 845,000 units in 2019 to over 1.37 million in 2024.
Despite President Trump’s renegotiation of a trade agreement with South Korea in 2018—designed to enhance vehicle imports to the country—the arrangement did little to boost U.S. vehicle exports to South Korea. Data from the International Trade Commission reveals a 16% decline in U.S. passenger vehicle exports to South Korea since the deal was enacted.
Truck imports from both nations are subject to a more substantial 25% tariff, which could also pose challenges in the trade balance. Tariffs create an additional tax burden on imported goods, with companies often passing these costs to consumers, which could, in turn, hike vehicle prices and curtail demand.
Impact on GM and Hyundai
Hyundai leads as the largest exporter of vehicles to the U.S., followed by GM and Kia Corp., which is primarily affiliated with Hyundai. GM has increased its imports from South Korea significantly, with sales of South Korean-manufactured vehicles rising from 173,000 in 2019 to over 407,000 in the previous year, according to GlobalData figures.
GM has become the largest foreign direct investor in Korea’s manufacturing sector, investing approximately 9 trillion South Korean won (around $6.2 billion) since launching operations there in 2002. The company produces several models in South Korea, including the Buick Encore GX and the Chevrolet Trailblazer, emphasizing profitability in entry-level vehicle segments.
During a recent investors’ meeting, GM President Mark Reuss highlighted the company’s strategic focus on cost reduction and product appeal, noting improvements in their market share within the U.S. small SUV space.
Neither GM nor Hyundai provided immediate comments regarding the potential for tariffs affecting South Korea, while Kia declined to offer any statements.
Terence Lau, dean at Syracuse University’s College of Law and former trade expert at Ford, noted that the automotive sector is fundamentally tied to principles of free trade. He acknowledged that while the industry could adapt to tariffs, such adjustments demand time. He indicated that tariffs under 10% may be manageable, but rates exceeding that threshold could significantly impact profit margins.
Comprehensive Tariff Policy Discussed
Ford Motor CEO Jim Farley recently argued that any consideration of tariffs on the automotive sector ought to adopt a holistic approach, evaluating all trading nations to level the marketplace in North America. He raised concerns about competitors like Toyota and Hyundai, which import substantial numbers of vehicles into the U.S. annually.
Farley remarked on the multitude of vehicles entering the U.S. that would not be subjected to the proposed tariffs, cautioning that selective tariff imposition could disproportionately benefit foreign competitors.
As discussions about tariffs unfold, the White House has yet to provide any official commentary regarding potential actions impacting South Korea. Trump has called for a press conference later this week to address his strategy for reciprocal tariffs, but it remains uncertain whether South Korea and Japan will be included in that consideration.
Meanwhile, Republican U.S. House Speaker Mike Johnson indicated there might be exemptions under consideration for industries like automotive and pharmaceuticals as the administration plans its next moves.
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