President Donald Trump welcomes South Korea’s President Moon Jae-In on the White Home in Washington, U.S., Could 22, 2018.
Carlos Barria | Reuters
DETROIT — As President Donald Trump threatens to additional enhance tariffs on U.S. buying and selling companions, the best impression for the auto business outdoors of North America can be further levies on South Korea and Japan.
The East Asian nations produced a mixed 16.8% of autos bought final 12 months within the U.S., together with a report 8.6% from South Korea and eight.2% from Japan, in accordance with knowledge offered to CNBC by GlobalData.
They had been the biggest car importers to the U.S. outdoors of Mexico — they usually have little to no duties in contrast with the 25% tariff Trump has threatened imposing on Canada and Mexico.
Automakers akin to Basic Motors and South Korea-based Hyundai Motor export autos tariff-free from South Korea. The nation overtook Japan and Canada final 12 months to turn out to be the second-largest exporter of latest automobiles to the U.S., primarily based on gross sales.
It trails solely Mexico, which represented 16.2% of U.S. auto gross sales in 2024, GlobalData stories.
“Clearly Hyundai has a large quantity of publicity. Behind it’s GM … with comparatively massive quantity fashions,” stated Jeff Schuster, international vice chairman of automotive analysis at GlobalData. “There’s a whole lot of threat doubtlessly right here, nevertheless it’s restricted, actually restricted, to these two gamers.”
Imports from Japan are at the moment topic to a 2.5% tariff for automakers akin to Toyota Motor, Nissan Motor and Honda Motor. Automobiles from Japan represented about 1.31 million autos bought final 12 months within the U.S.
Japan’s share of gross sales has really decreased lately, whereas South Korea’s exports and gross sales have continued to rise from lower than 845,000 in 2019 to greater than 1.37 million in 2024.
South Korea has 0% tariffs on automobiles regardless of Trump renegotiating a commerce cope with the nation throughout his first time period in 2018. That accord was touted for bettering car imports to South Korea, nevertheless it did little to handle car exports to the U.S.
The deal additionally has accomplished little for growing automotive exports to South Korea, in accordance with knowledge from the Worldwide Commerce Fee. U.S. passenger car exports to South Korea have really decreased by roughly 16%.
Separate from automobiles, tariffs on vans exported from South Korea and Japan to the U.S, in addition to elsewhere, are 25%.
A tariff is a tax on imports, or overseas items, introduced into america. The businesses importing the products pay the tariffs, and a few consultants concern the businesses would merely cross any further prices on to shoppers — elevating the price of autos and doubtlessly lowering demand.
GM, Hyundai
South Korea-based Hyundai is the biggest exporter of autos to the U.S., adopted by GM after which Kia Corp., part of Hyundai that largely operates individually within the U.S.
GM has notably elevated its imports from South Korea lately. Its U.S. gross sales of South Korean-produced autos — largely entry-level fashions — have risen from 173,000 in 2019 to greater than 407,000 final 12 months, in accordance with GlobalData.
GM is the biggest overseas direct investor in Korea’s manufacturing business, in accordance with the automaker’s web site. It has invested 9 trillion South Korean received (roughly $6.2 billion) since establishing the operations in 2002.
GM produces its Buick Encore GX and Buick Envista crossovers, in addition to the Chevrolet Trailblazer and Chevrolet Trax crossovers, at vegetation in South Korea. The corporate has touted the autos as being a pinnacle for the automaker’s worthwhile development in lower-margin, entry-level autos.
2024 Chevrolet Trax (left) and 2024 Buick Envista
Michael Wayland / CNBC
“We’re taking out prices of packages, bettering profitability and creating autos that clients love, like the brand new Chevy Trax and the Buick Envista,” GM President Mark Reuss stated in the course of the firm’s investor day in October. “Trax and Envista have helped increase our share of the U.S. small SUV market to its highest stage since 2007.”
GM and Kia declined to remark when requested about potential tariffs on South Korea. Hyundai touted its operations and investments within the U.S., which the carmaker says have totaled $20.5 billion since coming into the market in 1986, however didn’t instantly touch upon potential tariffs.
“For practically 4 a long time, Hyundai has been a driver of American development and innovation, contributing jobs, financial exercise, and investments which have helped People prosper. We welcome the chance to work with the brand new administration to assist American manufacturing, shield provide chains, and spur innovation,” Hyundai stated Thursday in an emailed assertion.
Terence Lau, dean of the School of Legislation at Syracuse College who beforehand labored as a commerce professional for Ford Motor, stated the automotive business is constructed on free commerce. If tariffs are carried out, the business can modify, nevertheless it takes time.
“The automobile business can modify to something. Actually, it could possibly. It is at all times going to make product that clients need to purchase, as a result of private mobility and transportation is a human want all all over the world,” he stated. “What the automobile business can’t do nicely is pivot on a dime.”
Lau argued {that a} single-digit tariff is usually a “nuisance,” however as soon as they hit 10% or extra, that is when further prices can actually started consuming into the margin or merchandise.
Tariff cherry-picking
Ford Motor CEO Jim Farley final week argued that if Trump goes to implement tariffs affecting the automotive business, it ought to take a “complete” look in any respect nations to even the taking part in area in North America.
Farley singled out Toyota and Hyundai for importing a whole bunch of 1000’s of autos yearly from Japan and South Korea, respectively.
Ford CEO Jim Farley poses for a photograph on the launch of the all-new electrical Ford F-150 Lightning pickup truck on the Ford Rouge Electrical Car Middle on April 26, 2022 in Dearborn, Michigan.
Invoice Pugliano | Getty Photos
“There are tens of millions of autos coming into our nation that aren’t being utilized to those [incremental tariffs],” Farley stated in the course of the firm’s fourth-quarter earnings name with buyers. “So if we will have a tariff coverage … it higher be complete for our business.
“We won’t simply cherry-pick one place or the opposite as a result of this can be a bonanza for our import rivals.”
The White Home didn’t reply for touch upon potential tariffs on South Korea.
Trump on Thursday signed a presidential memorandum laying out his plan to impose “reciprocal tariffs” on overseas nations, however didn’t go into element concerning what nations might be focused.
As a presidential candidate, Trump floated the potential for imposing across-the-board tariffs on all U.S. imports. However he additionally advocated for Congress to cross what he referred to as the “Trump Reciprocal Commerce Act,” which might empower him to slap tariffs on the products of any nation that has increased tariffs on U.S.-made items.
— CNBC’s Kevin Breuninger contributed to this report.