Detroit – As President Donald Trump threatens to increase tariffs on US trading partners more, the biggest impact for the non-North American automotive industry is the additional taxation of South Korea and Japan.
East Asian countries produced a total of 16.8% of vehicles sold in the US last year, according to data provided by GlobalData to CNBC.
They are the largest US vehicle importers outside of Mexico, and they have little duties compared to the 25% tariffs imposed on Canada and Mexico.
Automakers such as General Motors and South Korea-based Hyundai Motor export vehicles are not subject to tariffs from South Korea. The country overtook Japan and Canada last year, becoming the second largest exporter of new cars to the US based on sales.
According to GlobalData, it only tracks Mexico, which accounted for 16.2% of US car sales in 2024.
“There’s clearly a lot of exposure in Hyundai. Jeff Schuster, Vice President of Automotive Research at GlobalData, said: “There are a lot of potential risks here, but these two are the two. There are only a few players, and really limited.”
Imports from Japan are currently subject to 2.5% tariffs for automakers such as Toyota Motor, Nissan Motor and Honda Motor. The vehicles from Japan represented approximately 1.31 million cars sold in the US last year.
Although Japan’s sales share has been declining in recent years, South Korea’s exports and sales have continued to increase from less than 845,000 in 2019 to over 1.37 million in 2024.
South Korea has 0% tariffs on its cars despite Trump renegotiating a trade deal with the country during its first term in 2018. The agreement was touted to improve vehicle imports to South Korea, but it rarely dealt with vehicle exports to the US.
According to data from the International Trade Commission, the transaction is also rarely carried out regarding an increase in automobile exports to South Korea. US passenger car exports to South Korea have actually dropped by around 16%.
Apart from cars, tariffs on trucks exported to the US from Korea and Japan, and elsewhere 25%.
Customs duties are taxes on imports or foreign goods brought into the United States. Companies importing goods pay customs duties, and some experts fear that the company simply passes additional costs to consumers. It could increase vehicle costs and reduce demand.
GM, Hyundai
Based in Korea, Hyundai is the largest exporter of vehicles to the US, followed by GM and Kia Corp., a part of Hyundai, which operates largely separately in the US.
GM has been significantly increasing imports from South Korea in recent years. According to GlobalData, US sales (mainly entry-level models) of vehicles produced in Korea rose from 173,000 in 2019 to over 407,000 last year.
According to the automaker’s website, GM is the largest direct investor in South Korea’s manufacturing industry. Since establishing the business in 2002, it has invested 9 trillion won (approximately $6.2 billion).
GM produces Buick Encore GX and Buick Envista Crossovers, as well as Chevrolet Trailblazer and Chevrolet Trax Crossovers. The company touts the vehicle as the pinnacle of the automaker’s profitable growth with vehicles at lower margin levels.
“We take out the costs of our programs, increase profitability and create vehicles that our customers love, such as the new Chevy Trax and Buick Anvista,” said GM President Mark Reuss, who was the company’s investor in October. I said this on the day. “Trax and Envista have helped us to bring the share of the US small SUV market to the highest level since 2007.”
Hyundai did not respond immediately when asked about potential tariffs in South Korea. GM and KIA declined to comment.
The automotive industry is built on free trade, says Terence Lau, dean of law at Syracuse University, who previously worked as a trade expert at Ford Motors. If tariffs are implemented, the industry can adjust but takes time.
“The automotive industry can be tailored to anything. Really, it can be. Personal mobility and transportation is human needs all over the world, so we always create the products our customers want to buy,” he said. . “What the automotive industry doesn’t do well is pivoting towards the dime.”
Lau argued that single-digit tariffs could be “nuisance,” but once they reached 10% or more, additional costs actually began to get into margins and products.
Customs Cherry Picking
Ford Motor CEO Jim Farley last week argued that if Trump implements tariffs that affect the automotive industry, even North American arenas should take a “comprehensive” view.
Farley imported hundreds of thousands of vehicles each year from Japan and South Korea, respectively, making it a single-out of Toyota and Hyundai.
“Millions of vehicles have appeared in our country in the absence of these (incremental tariffs),” Farley said in a fourth-quarter revenue call with investors. “So if you have a customs policy…it would be better for our industry to be comprehensive.
“It’s a jackpot for import competitors, so you can’t take a single location.”
The White House did not respond to comments on South Korea’s potential tariffs.
Trump on Thursday signed a memorandum of understanding from the president, who had his plan to impose “mutual tariffs” on foreign countries, but did not elaborate on which countries would be targeted.
As a presidential candidate, Trump has raised the possibility of imposing full tariffs on all US imports. However, he also advocated that Congress would pass what is called the “Trump Mutual Trade Act.”
– CNBC’s Kevin Breuninger contributed to this report.
