Washington: U.S. President Donald Trump announced on Wednesday that his administration will begin imposing a 25 percent tariff on all imported cars starting April 2. This new levy is expected to significantly impact South Korea's automotive sector, given its substantial export relationship with the United States.
According to Yonhap News Agency, Trump signed a proclamation during a press event, initiating the tariffs on foreign-made cars and light trucks. These tariffs are part of his strategy to enhance domestic manufacturing and reduce the U.S. trade deficit. An aide to Trump noted that the new levies could generate over $100 billion in annual revenue for the U.S. economy.
Trump described the tariffs as a "modest" measure, arguing that countries trading with the U.S. have "taken so much out of our country." He emphasized that cars made in the United States would not be subject to these tariffs. Additionally, Trump mentioned efforts to allow buyers of U.S.-made cars to deduct interest payments on car loans for tax purposes.
The implementation of the auto tariffs aligns with Trump's broader strategy of imposing reciprocal tariffs, designed to match the tariffs that other countries impose on U.S. exports. These reciprocal duties will be tailored based on various factors such as trading partners' tariff and non-tariff barriers and exchange rates. Trump stated that the reciprocal tariffs would apply to "all countries" and hinted that they might be more lenient than expected.
The announcement has caused concern among South Korean businesses, who are attempting to mitigate the potential effects of the new U.S. tariffs. The United States is a major market for South Korean auto exports, accounting for $34.7 billion or 49.1 percent of South Korea's total car exports last year. Hyundai Motor Group and GM Korea exported approximately 970,000 and 410,000 vehicles to the U.S., respectively, in the previous year.
Since 2016, under a bilateral free trade agreement, no U.S. tariffs have been imposed on Korean cars. Amid the rising tariff pressure, Hyundai Motor Group announced plans to invest $21 billion in the U.S. by 2028. This investment includes $8.6 billion for the automotive sector, $6.1 billion for the steel industry, component parts, and logistics, and $6.3 billion for future industry sectors and energy.
The Trump administration's decision to impose these tariffs follows feedback from various U.S. industry groups. Some business groups have raised concerns about Korea-related trade issues, such as Korea's age-based beef import restrictions, online platform regulations, and the "screen quota system" requiring local theaters to allocate screening time for Korean-produced films.