U.S. tariffs on automobiles, set for April 2, are raising concerns over their impact on South Korea’s economy. As the second-largest exporter of cars to the U.S., S. Korea faces significant risks to its auto industry, with potential disruptions to its growing exports and production.
Previously on Feb. 10, President Donald Trump announced that tariffs would be applied to automobiles, semiconductors, and pharmaceuticals regardless of country, marking the first time he set a specific date for these tariffs.
S. Korea, which became the top exporter to the U.S. automotive market last year, is expected to be a primary target with this new policy. With tariffs on steel and aluminum set to take effect on Mar. 12 and reciprocal tariffs scheduled for April, concerns are rising that the tariffs could deal a severe blow to S. Korea’s economy.
In 2024, S. Korea’s automobile exports to the U.S. totaled $34.7 billion, making up 27% of total U.S. imports from S. Korea—the largest share. A disruption in these exports could cause a sharp drop in U.S. exports, further harming S. Korea’s economy, which is already facing a decline in exports to China.
During a signing ceremony at the White House on Feb. 14, Trump indicated that the auto tariffs would likely take effect around Apr. 2. This came after previous announcements of a 10% tariff on China, a 25% tariff on steel and aluminum, and planned tariffs on Mexico and Canada.
Among the major countries exporting automobiles to the U.S., Mexico and Canada are already subject to tariff plans, and Japan, with substantial U.S. production, is less vulnerable. As a result, S. Korea is expected to bear the brunt of the initial impact. With President Trump having shown a clear intent to introduce auto tariffs since his first term, analysts believe their implementation is imminent.
According to the U.S. Department of Commerce, S. Korea accounted for 1.54 million of the 8.02 million cars the U.S. imported last year. Following Mexico, which exported 2.96 million vehicles, S. Korea now ranks second, surpassing Japan and Canada. Given that Mexico serves primarily as a production base for U.S. automakers such as GM, Ford, and Stellantis, S. Korea is effectively the top foreign exporter.
Last year marked 38 years since Hyundai introduced the Pony Excel to the U.S. market, making South Korea the leader among major auto-exporting countries, surpassing Japan and Germany. However, this success has fueled concerns that it could now be a target in the growing trade war driven by Trump’s tariff threats.
Meanwhile, S. Korea has seen a dramatic rise in the U.S. automotive market. The U.S.-Korea Free Trade Agreement (FTA), effective since 2012, has expanded duty-free benefits, strengthening S. Korea’s foothold in the U.S. market. Also, Hyundai and Kia’s SUVs and electric vehicles gained popularity after the COVID-19 pandemic, helping them surpass competitors.
In relation to this, S. Korean automobile exports to the U.S. surged from 940,000 in 2022 to 1.24 million in 2023 and 1.54 million last year. This growth has pushed Japan (1.38 million) and Canada (1.07 million) down the rankings. However, analysts predict that as K-cars gain strength in the U.S. market, the Trump administration’s focus on local production could lead to retaliatory tariffs that will hurt the industry.
Hyundai and Kia began operations at their new Meta-Plant in Georgia in Oct. 2024, increasing their U.S. production capacity to 1 million vehicles. But most of their premium models, including the Genesis line, are still produced in S. Korea, meaning high tariffs would erode price competitiveness.
The future of GM Korea, which exports over 90% of its production to the U.S., is also in jeopardy. GM Korea increased its U.S. exports to 420,000 units last year, relying on the domestic parts ecosystem built during the Daewoo Motor era. However, tariffs could block export routes to the U.S., threatening the company’s future. An industry insider noted, “GM Korea’s exports account for 15% of GM’s U.S. sales, so tariffs on S. Korea would hurt U.S. companies as well.”
