US tariffs on imported cars to impact South Korean carmakers

The United States’ decision to impose a 25% tariff on imported vehicles next month is expected to have a significant impact on South Korean carmakers, who rely heavily on exports to the U.S., analysts said Thursday.

President Donald Trump signed a proclamation enforcing the new tariffs on foreign-made cars, light trucks, and key auto parts, set to take effect next Wednesday.

South Korea exported $34.7 billion worth of vehicles to the U.S. last year, nearly half of the country’s total car exports of $70.8 billion, according to Yonhap News Agency.

Under the Korea-U.S. Free Trade Agreement (KORUS), Korean-made cars have been exempt from U.S. tariffs. However, the new 25% tariff will drive up the cost of Korean vehicles in the U.S. market, potentially impacting South Korea’s economy.

A report from the IBK Economic Research Institute predicts that South Korea’s car exports to the U.S. will decline by 18.59% due to the new tariffs. Citi Research also forecasts a 0.203% drop in South Korea’s GDP, given the tariffs on cars, auto parts, medicines, and semiconductors.

Hyundai Motor Group, the largest automaker in South Korea, is expected to face short-term challenges despite its recent $21 billion investment plan in the U.S. The company, which operates three production plants in the U.S., including the newly opened Hyundai Motor Group Metaplant America (HMGMA) in Georgia, aims to expand local production to reduce tariff exposure. However, the expansion will take time, as HMGMA produced only 4,000 units last month despite its 300,000-vehicle capacity.

The new tariffs also raise concerns about the future of GM Korea Co., the South Korean unit of General Motors Co. The company, which exported 410,000 vehicles to the U.S. last year—85% of its total overseas sales—previously shut down a Korean factory in 2019 due to profitability concerns.

Industry experts stress the need for the South Korean government to seek exemptions or negotiate favorable terms by emphasizing Korean companies’ investments in the U.S.

“This is something we have been concerned about and preparing for,” an industry official said. “Individual companies cannot tackle this alone. We are closely monitoring the situation and waiting for government intervention.”

During the HMGMA opening ceremony, Hyundai Motor Group Executive Chair Euisun Chung echoed the call for diplomatic efforts.

“I know our investment plan may not influence Washington’s tariff policies,” he said. “This is a matter between governments, not companies.”