Why Trump's 25 percent tariff on Mexico is bad news for Hyundai and Kia

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Why Trump's 25 percent tariff on Mexico is bad news for Hyundai and Kia

U.S. President Donald Trump throws pens used to sign executive orders to the crowd during an inauguration event in Washington on Jan. 20. [AP/YONHAP]

U.S. President Donald Trump throws pens used to sign executive orders to the crowd during an inauguration event in Washington on Jan. 20. [AP/YONHAP]

 
U.S. President Donald Trump's announcement of major tariffs on Canada, Mexico and China is contributing to Korea's economic jitters as the export-driven nation grapples with intensifying competition.
 
Washington announced on Saturday that the United States would impose 25 percent tariffs on imports from Canada and Mexico and 10 percent tariffs on imports from China starting Tuesday.
 

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The White House claimed the move would hold the United States’ three largest trade partners accountable “to their promises of halting illegal immigration and stopping poisonous fentanyl and other drugs from flowing into our country.”
 
Canada and Mexico announced retaliatory tariffs in return. The White House indicated that retaliation could cause tariff rates to increase.
 
While Korea was not directly caught in the latest line of fire, the country’s auto parts suppliers operating in Mexico as part of their near-shoring strategies leveraging the U.S.-Mexico-Canada Agreement are likely to take a hit from the higher trade barriers.
 
Hyundai Wia, an engine supplier, operates a production facility in Monterrey, Mexico, where it manufactures engines for Hyundai Motor and Kia’s U.S. plants. Other carmakers and part suppliers operating in Mexico include Kia, Hyundai Mobis, Hyundai Transys and LS Automotive.
 
The threat of universal tariffs also looms large over the Korean economy. The newly inaugurated U.S. administration has repeatedly signaled its intention to hike trade barriers for its allies, including Korea and Japan, to bring manufacturing onto U.S. soil.
 
On Jan. 31, Trump threatened to impose tariffs on semiconductors, steel, oil and pharmaceuticals, which could take a significant toll on Korea’s chipmakers.
 
According to Korea Institute for Industrial Economics & Trade, 25 percent tariffs on Mexico and Canada and 10 percent universal tariffs on other countries, including China and Korea, could reduce Korea’s exports to the United States by 10.2 percent, with automotive exports, in particular, contracting an estimated 13.6 percent.
 
Acting President Choi Sang-mok ordered relevant government branches to closely monitor the implications of Trump’s latest executive order on the Korean economy, noting that it “may have a significant impact” on domestic businesses, the Ministry of Economy and Finance said Sunday.

BY SHIN HA-NEE [[email protected]]
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