South Korean carmakers are bracing for disruptions after President Donald Trump announced plans to impose tariffs on imported vehicles, a move that could jeopardize Hyundai Motor Company and Kia’s U.S. sales. Many of Hyundai and Kia’s best-selling models are manufactured in Korea and exported to the U.S. The companies face mounting pressure to expand production in the U.S., but the prospect is daunting as it requires approval from powerful labor unions.
President Trump said on Feb. 14 that he plans to impose tariffs on imported cars around April 2.
Hyundai and Kia operate manufacturing plants in Alabama and Georgia and launched Metaplant America, a new production facility in Georgia dedicated to electric vehicles, last October. However, many models they sell in the U.S. are still produced in South Korea and shipped to the U.S.
Last year, Hyundai and Kia sold a combined 1.71 million vehicles in the U.S., but the number of vehicles manufactured at their American plants amounted to just 715,732 units.
Hyundai’s top-selling model in the U.S. last year was the Tucson, a midsize SUV, with 206,126 units sold. The compact sedan Avante, marketed in the U.S. as the Elantra, followed with 136,698 units, while the Santa Fe SUV ranked third with 119,010 units.
For Kia, the Sportage SUV was the best-selling model, with sales reaching 161,917 units last year. The compact sedan K3 and its successor K4 together sold 139,778 units, while the large SUV Telluride recorded 115,504 units in sales.
Hyundai manufactures the internal combustion engine model of the Tucson at its Alabama plant, but the hybrid model is produced in Ulsan, South Korea. Tucson Hybrid sales in the U.S. surged 65.9% to 66,885 units last year, reflecting the growing consumer demand for hybrid vehicles. The proposed tariffs could undermine Hyundai’s price competitiveness in the U.S.
Similarly, Hyundai’s second-best-selling model in the U.S., the Avante, is produced at its Ulsan plant and then exported to the U.S. Kia’s K4 also falls into the same category. The Hyundai Palisade and nearly all Genesis models, except for the U.S.-made GV70 EV, are manufactured in Korea and shipped to the U.S. Genesis sold 75,003 units in the U.S. last year.
Hyundai and Kia’s U.S. sales are set to take a hit if the proposed tariffs take effect in April. Both carmakers will need to ramp up U.S. production to maintain price competitive pricing, but this requires labor union approval. Hyundai’s 1999 collective bargaining agreement states that the joint labor-management committee must review and approve shifting the production of a vehicle model to an overseas plant. Kia has a similar agreement in place.
Hyundai and Kia’s labor unions, part of the broader Korean Metal Workers' Union, have long resisted relocating production overseas. In 2010, union leaders demanded that the companies cap the percentage of vehicles produced outside Korea. Similar demands were made in 2015 and 2019, with the unions pushing for a production ratio system to safeguard domestic jobs.
The unions are prickly about shifting production, as domestic car sales have been sluggish due to a slowdown in EV demand. If the production of best-selling models is moved abroad, bonuses and performance incentives for workers could be reduced, further intensifying labor tensions.
“Even if the unions reach an agreement with management to expand U.S. production, the process involves numerous regulatory and logistical hurdles,” said an industry insider. “If the tariffs take effect on April 2, avoiding short-term disruptions will be nearly impossible.”
