Trump tariffs put Hyundai, Kia on collision course for big losses

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Trump tariffs put Hyundai, Kia on collision course for big losses

Published: 27 Mar. 2025, 18:27

SARAH CHEA
[email protected]

Audio report: written by reporters, read by AI

U.S. President Donald Trump displays an executive order he signed announcing tariffs on auto imports in the Oval Office of the White House in Washington on March 26. [AFP/YONHAP]

U.S. President Donald Trump slapped 25 percent tariffs on all car imports, striking a body blow to automakers in Korea that will have to pay the price — tens of trillions of won in profit and even a full withdrawal from Korea.

Trump inked an executive order imposing a 25 percent tariff on Wednesday that will take effect on April 2 while asserting that they are "permanent” and that he isn't considering further negotiations for any exceptions.

The announcement poses a particular threat to Korea, which remains one of the countries running up a large trade surplus with the United States. Automobiles are Korea's No. 1 export to the U.S. market, with $34.74 billion in trade last year, making up 27.2 percent of U.S.-bound shipments, according to the Korea International Trade Association. Vehicle shipments going the other way that year, on the other hand, came to only $2.1 billion.

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With the tariff, this year's automobile exports will likely drop by 18.6 percent, or a cut of 9 trillion won ($6.14 billion), according to estimates by the Industrial Bank of Korea.

Hyundai Motor and Kia, the country's two largest automakers, will come under heavy strain as around 65 percent of their vehicles sold in the United States were not made there.

The two brands sold roughly 1.7 million vehicles in the U.S. market in 2024 — one out of four cars they sold — and of them, 57 percent, or 1 million units, were made in Korea, while some 140,000 units were made in Mexico, which is already subject to 20 percent tariffs.

With the levies, Hyundai and Kia will be on track to suffer a slash of over 10.7 trillion won in operating profit, according to a prediction by SK Securities.

Hyundai's newly opened $8 billion Metaplant in Georgia is specifically designed for EVs and hybrid cars, offering only a moderate opportunity to adjust the country of origin to benefit its sales in the country.

Of the combined 1.7 million units sold in the U.S. market, only 20 percent, or 346,347 vehicles, were EVs and hybrids in 2024. Of those, only 12 percent were produced in U.S. plants, the category the new Georgia plant can influence.

Hyundai Motor and Kia's cars are awaiting to be exported at a port in Pyeongtaek, Gyeonggi, on March 27. [YONHAP]

Industry watchers analyze that the huge duty imposition will inevitably cause automakers to raise prices, which hurts consumers.

"The price of a new vehicle will see increases in the range of several thousand dollars to as high as $10,000 or more due to tariffs," said Ken Kim, a senior economist at KPMG. "The upper estimate would represent a 20 percent increase given that the average transaction price for a new vehicle is about $48,500. Consumers are already reeling from elevated inflation. Talk about sticker shock."

Kia has also hinted at a possible price hike. The impact will be tougher on the Hyundai affiliate as it operates a manufacturing factory in Mexico as well.

"We're planning to hedge against the increased expenses through price increases and production cost control," said Kia CFO Kim Seung-jun during a conference call in January.

GM Korea will also be hit hard by the levies due to its heavy reliance on U.S. exports, escalating the chances that General Motors will pull the plug on its Korean business, a scenario that has been speculated on for years.

The Korean arm of General Motors sold a total of 499,559 cars in 2024, and of them, exports made up 95 percent, or 473,165 units. Of the exports, 88.5 percent, or 418,782 units, were shipped to the United States. Based on a simple calculation, GM Korea's U.S.-bound shipments would come with an added cost of over 3 trillion won just to cover the tariff.

Yet, the automaker can't shift the supply onto Korean consumers. Its presence in the market at home has been on a sharp slide in recent years, with total sales ending at 24,824 units last year, down 35.9 percent from a year earlier.

Korea's Ministry of Trade, Industry and Energy immediately held an emergency meeting with executives from Korean car and auto parts companies on Thursday and pledged to "come up with detailed countermeasures within April."

"Considerable difficulties are expected for Korean companies. The Korean government will always carry on close talks with the U.S. government and the industry to minimize the damage," Trade Minister Ahn Duk-geun said.

BY SARAH CHEA [[email protected]]