On Wednesday, South Korea unveiled emergency measures aimed at supporting its automotive industry in response to the tariffs imposed by U.S. President Donald Trump, which threaten to impact a sector that has enjoyed significant export growth to the United States in recent years.
The announced actions include financial assistance for automakers, alongside tax reductions and subsidies designed to enhance domestic demand. Additionally, the government expressed its commitment to negotiate with the U.S. and facilitate market expansion.
Trump’s tariffs, set to take effect on Thursday, impose a 25% duty on imported cars and light trucks, which affects over $460 billion in annual vehicle and auto parts imports, based on a Reuters evaluation.
Manufacturers may shoulder some of the tariff burden in the initial year, but they are anticipated to adjust production strategies and might discontinue importing certain low-volume models into the U.S. market.
The government stated, “Considering the lower proportion of production by South Korean automakers in the U.S., our industry is relatively at a disadvantage.”
While the tariffs are projected to inflict “significant” harm on South Korea’s automakers and parts producers, the government admitted that providing precise numerical damage estimates is challenging at this time.
To mitigate potential liquidity challenges, it plans to increase policy financing support for automakers to 15 trillion won ($10.18 billion) by 2025, up from the previously planned 13 trillion won.
The government will also reduce automobile purchase taxes to 3.5% from the current 5% through June 2025 and will enhance electric vehicle subsidies to 30%-80% from the present 20%-40%, extending this period for an additional six months until the end of this year.
Furthermore, South Korea’s government pledged to actively assist automakers in seeking export markets within the “Global South,” referring to developing nations in Africa, Latin America, and Asia, where market demand is on the rise.
Concerning the U.S. tariffs, the government stated, “We will make every effort to ensure that South Korea is not treated unfavorably compared to other allies, through negotiations and enhanced bilateral cooperation,” without providing further specifics.
In 2024, South Korean automotive exports to the U.S. reached $34.7 billion, representing 49% of the nation’s total automotive exports.
Hyundai Motor announced last week its intent to maintain the prices of its current model lineup for the next two months to alleviate customer concerns regarding possible impacts of the tariffs on dealership inventories.
This price program will run until June 2 and follows Hyundai’s recent $21 billion investment in the U.S., disclosed last month.
Hyundai’s co-CEO, Jose Munoz, confirmed there are no intentions to increase prices in the U.S., which is Hyundai’s most lucrative market.
Experts noted that Trump might leverage aggressive tariffs to obtain prompt concessions during negotiations, indicating that these auto tariffs could increase overall vehicle production costs. Among various vehicle types, the electric vehicle (EV) supply chain may be particularly affected due to its reliance on China for essential EV components.