On Wednesday, South Korea introduced urgent assistance measures aimed at its automotive industry, targeting the impacts of tariffs imposed by U.S. President Donald Trump, which have followed a significant rise in exports to the U.S. over recent years.
These measures will provide financial aid to car manufacturers along with tax reductions and incentives to stimulate domestic demand. Additionally, the government pledged to engage in negotiations with the U.S. to facilitate market expansion.
Beginning Thursday, Trump has enacted a 25% tariff on imported cars and light trucks, which encompasses over $460 billion in vehicle and auto parts imports annually, as analyzed by Reuters.
Manufacturers are expected to shoulder some tariff costs in the first year; however, they might eventually adjust production and potentially stop importing certain low-volume models into the U.S. consumer market.
The government stated, “Considering the smaller share of local production from South Korean automakers in the U.S., our sector faces a relatively tougher position.”
The tariff is predicted to inflict “substantial” harm on South Korean automakers and parts suppliers, although providing specific numerical impacts at this time remains challenging, according to government officials.
To avert liquidity challenges, the government plans to increase policy financing support for car manufacturers to 15 trillion won (approximately $10.18 billion) in 2025, up from the previously projected 13 trillion won.
Furthermore, taxes on vehicle purchases will be reduced from 5% to 3.5% until June 2025, and subsidies for electric vehicles will be ramped up to 30%-80% of price discounts from the previous 20%-40%, extending this initiative by an additional six months, until the end of the year.
The South Korean government also revealed intentions to actively assist automotive companies in expanding their export markets to the “Global South,” a term that describes developing nations in regions such as Africa, Latin America, and Asia, which are seeing increasing demand.
Regarding the tariffs imposed by the U.S., the government remarked, “We will strive to ensure that South Korea is not treated unfavorably compared to other allies through negotiations and enhanced bilateral cooperation,” although no specifics were provided.
In 2024, South Korean automobile exports to the U.S. reached $34.7 billion, making up 49% of the country’s total auto exports.
Last week, Hyundai Motor announced its intention to maintain current pricing on its model range for the next two months to alleviate consumer worries regarding potential impacts from tariffs on dealer inventory. This program is set to run until June 2 and follows the group’s recent announcement of a $21 billion investment in the U.S.
Hyundai’s co-CEO, Jose Munoz, indicated that there are no plans to increase prices in the United States, which is Hyundai’s largest market by revenue.
Experts noted that Trump could be inclined to propose significant tariffs as a means of obtaining immediate concessions during negotiations. They also indicated that these auto tariffs would likely increase input costs for vehicles overall. Particularly concerning is the fact that the electric vehicle (EV) supply chain might experience greater challenges due to its reliance on China for EV components, compared to the conventional combustion vehicle supply chain.