Trump eases double tariff hit on cars, but Korean automakers still apprehensive

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Trump eases double tariff hit on cars, but Korean automakers still apprehensive

Published: 29 Apr. 2025, 17:43 Updated: 29 Apr. 2025, 18:32

Audio report: written by reporters, read by AI

U.S. President Donald Trump delivers remarks during a visit with the 2025 Super Bowl champions, the Philadelphia Eagles, on the South Lawn of the White House in Washington on April 28. [EPA/YONHAP]

U.S. President Donald Trump has decided to ease the tariff burden on imported automobiles and related parts, with foreign-made vehicles subject to a 25 percent tariff no longer facing overlapping tariffs on steel and aluminum.

Auto manufacturers will not be subject to additional tariffs beyond the automobile tariff, according to the Wall Street Journal (WSJ) on Monday, citing Trump administration officials. If other tariffs have already been paid, they will be refunded.

The Trump administration imposed a 25 percent tariff on imported cars starting April 3 and began applying the same rate to imported steel and aluminum from April 12.

Parts for automobiles are also set to be hit with a 25 percent tariff beginning May 3. However, for the next year, the United States will refund up to 3.75 percent of the domestic sale price of vehicles, and up to 2.5 percent in the second year. The decision marks a partial retreat from the administration’s original tariff policy for the auto sector.

"The measure to prevent duplicate tariffs may not have a significant impact because the number of items affected is small,” said Han A-reum, a senior researcher at Korea International Trade Association. “However, if the partial refund of tariffs on parts is actually applied, this measure could be an incentive for the auto industry.”

Export-ready cars are seen parked at a exclusive port for automobiles in Pyeongtaek, Gyeonggi, on April 29. [NEWS1]

Trump’s shift comes in response to appeals from the U.S. auto industry and labor unions, which have voiced concerns about the impact of high tariffs. U.S. auto firms have argued that restructuring their supply chains to expand domestic production will take time and have requested tariff relief.

“Automakers and industry suppliers have said bringing back their factories to the U.S. — the goal of Trump’s tariff plan — could take years,” the WSJ reported.

The White House said Trump would formally announce the tariff relief at 5:15 p.m. on Tuesday during a visit to Macomb County, Michigan. The announcement will be made in front of reporters, followed by an event marking the 100th day of Trump’s presidency.

A venue at a university in Macomb County, Michigan, where U.S. President Donald Trump is set to deliver a speech marking the first 100 days of his second administration on April 30, seen on April 29. [YONHAP]

Macomb County, located near Detroit, is a key hub of the U.S. auto industry. Michigan is home to major car manufacturers like General Motors and has been one of the regions most affected by Trump’s auto tariffs. The state is also considered a swing state that played a crucial role in Trump’s 2016 election campaign.

Trump had hinted at the move on April 14, saying, “I’m looking at something to help car companies with it,” adding, “they’re switching to parts that were made in Canada, Mexico and other places, and they need a little bit of time, because they’re going to make them here.”

“President Trump is building an important partnership with both the domestic automakers and our great American workers,” Commerce Secretary Howard Lutnick said in a statement. “This deal will be a major victory for the president’s trade policy by rewarding companies who are already manufacturing domestically, while providing a runway to manufacturers who have expressed their commitment in investing in America and expanding domestic manufacturing.”

Cars manufactured for exports are seen parked at an exclusive port for automobiles in Pyeongtaek, Gyeonggi, on April 29. [NEWS1]

Korean automakers watching closely

Korean automakers reacted with caution to the decision to ease tariffs on imported cars and parts. Hyundai Motor Group said it would “closely monitor the tariff policy and prepare to respond accordingly,” adding that it would refrain from further comment for now given the high volatility of the policy environment.

Still, if tariffs on auto parts for vehicles produced in the United States are partially refunded, the move could lead to cost savings. Hyundai and Kia sold 1,708,293 vehicles in the country last year, of which 715,732 units, or 41.9 percent, were manufactured locally.

Hyundai Motor Group has announced a plan to invest $21 billion over four years to build local production facilities with an annual capacity of 1.2 million units.

Export-ready cars are seen parked at an exclusive port for automobiles in Pyeongtaek, Gyeonggi, on April 29. [NEWS1]

Appeasing local automakers

Observers view the Trump administration’s latest action as intended to appease U.S. automakers. Ford, General Motors (GM), and Stellantis have continuously urged the Trump administration to ease tariffs on auto parts. According to a report by the Financial Times (FT) on Thursday, John Elkann, chairman of Stellantis, recently warned that auto parts tariffs jeopardize the auto industries of both the U.S. and Europe.

Interest groups such as the Alliance for Automotive Innovation, the American Auto Policy Council and the National Automobile Dealers Association also sent a letter to the Trump administration last Tuesday, emphasizing that “most auto suppliers are not capitalized for an abrupt tariff induced disruption and many are already in distress and will face production stoppages, layoffs and bankruptcy."

Vehicles manufactured in the United States rely on imported parts for about 60 percent of their components, according to FT. The Ford F-150 pickup truck has a 55 percent dependence, and GM’s Chevrolet Silverado about 50 percent. If auto parts are subject to additional tariffs on top of the existing vehicle tariffs, the resulting cost increases could be reflected in retail prices, potentially shrinking demand for new cars.

The GM logo is seen on the facade of the General Motors headquarters in Detroit, Michigan, on March 16, 2021. [REUTERS/YONHAP]

This explains why U.S. automakers are intensively lobbying the Trump administration to address the problems caused by the parts tariffs.

Lee Hang-koo, researcher at the Korea Automotive Technology Institute, interpreted the administration’s move as “a measure to maintain the 25 percent tariff on automobiles while reducing the immediate damage to U.S. automakers, who are heavily dependent on imported parts.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY LEE SU-JEONG, LEE SEUNG-HO [[email protected]]