Washington: U.S. President Donald Trump announced on Wednesday that his administration will implement 25 percent tariffs on all imported cars starting April 2, a move likely to impact South Korea's automotive exports significantly. Trump signed a proclamation that will see the new tariffs applied to foreign-made cars, light trucks, and essential parts like engines and transmissions, as part of an effort to bolster domestic manufacturing and reduce the U.S. trade deficit.
According to Yonhap News Agency, the tariffs will be enacted under Section 232 of the Trade Expansion Act of 1962, which allows the president to adjust imports if they are deemed a threat to national security. Trump described the tariff as a "modest" measure and criticized countries that have engaged in trade with the U.S., stating they have "taken so much out of our country, friend and foe."
The tariffs will add to existing duties, with a Trump aide highlighting that the new levies are expected to generate over $100 billion in annual revenue for the U.S. The White House clarified that importers under the U.S.-Mexico-Canada Agreement (USMCA) could certify their U.S. content, ensuring the 25 percent tariff applies only to the value of their non-U.S. content. USMCA-compliant parts will remain tariff-free until a process is established to apply tariffs to non-U.S. content.
Additionally, Trump proposed a tax incentive for consumers purchasing U.S.-made cars, allowing interest payments on car loans to be deducted from income tax. The auto tariffs will coincide with the announcement of reciprocal tariffs, aimed at matching tariffs that other countries impose on U.S. exports, based on various factors including exchange rates.
South Korean businesses, with the U.S. being a primary export market, are particularly concerned about the tariffs. Last year, South Korea exported cars worth $34.7 billion to the U.S., accounting for 49.1 percent of its total car exports. Hyundai Motor Group and GM Korea exported approximately 970,000 and 410,000 units to the U.S., respectively.
In response to the tariff pressure, Hyundai Motor Group announced a $21 billion investment plan in the U.S. through 2028, targeting various sectors, including $8.6 billion for the automotive sector.
The Trump administration's tariff strategy follows feedback from multiple U.S. industry groups, with ongoing trade issues between the U.S. and Korea, such as beef import restrictions and local content requirements for theaters, remaining contentious topics.