Washington: U.S. President Donald Trump announced on Wednesday that his administration will impose 25 percent tariffs on all imported cars starting April 2, a move expected to significantly affect South Korea's automotive sector.
According to Yonhap News Agency, Trump signed a proclamation to implement the new tariffs on foreign-made cars, light trucks, and essential components like engines and transmissions. The tariffs are set to take effect in early April, with collection beginning the following day. Invoking Section 232 of the Trade Expansion Act of 1962, Trump aims to bolster domestic manufacturing and cut the U.S. trade deficit, citing national security concerns.
Trump described the tariffs as a "modest" measure to address the economic impacts of foreign trade. He emphasized that vehicles manufactured in the United States would not be subject to these tariffs. The new duties are expected to generate over $100 billion in annual revenue for the U.S., as per a Trump aide.
The White House clarified that importers under the U.S.-Mexico-Canada Agreement (USMCA) could certify their U.S. content to limit tariffs to the non-U.S. portion. USMCA-compliant auto parts will remain tariff-free until further processes are established.
The decision aligns with the Trump administration's vision to revitalize Detroit, Michigan, as a comprehensive "motor city." A senior U.S. official highlighted the need to reduce reliance on foreign-produced auto parts, noting that a significant portion of motors are imported from Germany, Japan, and South Korea.
Additionally, Trump proposed allowing interest payments on loans for U.S.-made cars to be tax-deductible. The auto tariffs coincide with Trump's reciprocal tariff announcement, aiming to match foreign tariffs on U.S. exports.
South Korean businesses are closely monitoring these developments, as the U.S. is a primary market for their auto exports. Last year, South Korea exported $34.7 billion worth of cars to the U.S., accounting for 49.1 percent of its total car exports. Hyundai Motor Group and GM Korea shipped around 970,000 and 410,000 units, respectively.
In response to the growing tariff pressures, Hyundai Motor Group announced plans to invest $21 billion in the U.S. by 2028, focusing on the automotive and steel sectors, as well as future industries and energy.
The Trump administration's tariff strategy follows feedback from U.S. industry groups concerned with various Korea-related trade issues, such as beef import restrictions and online platform regulations.