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December 19, 2018

US tariff move adds uncertainty to Korean automakers

PUBLISHED : June 03, 2018 - 16:03

UPDATED : June 03, 2018 - 16:03

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[THE INVESTOR] The US latest tariff move has added uncertainty to the Korean automobile companies already facing a decline in sales in its largest export destination. The US Department of Commerce recently sought opinions from interested parties pursuant to Section 232 to determine the national security impacts of automobile imports. This is a follow-up measure to the President Donald Trump ordering it last month to review whether it can impose up to 25 percent tariff on imported cars.

Industry watchers have raised questions that the Trump administration might be considering even discriminating foreign carmakers that have a production facility in the US.




The Department of Commerce have been asking interested parties how things will change when separating cars produced in the US by US-owned companies from foreign carmakers that manufacture vehicles on American soil.

If so, this may be bad news for the nation’s largest automaker, Hyundai Motor, which announced last month the investment of 420 billion won (US$390 million) in Alabama in an apparent move to respond to the US growing protectionism, according to experts.

“We can’t understand accurately why the US tried to classify its own brands and foreign brands. But, this may mean that ‘the US-owned brand’ is still more important even if foreign companies produce products in the US,“ said Ahn Duk-geun, a professor of Seoul National University’s graduate school of international studies.

Based on the investigation, the US Department of Commerce plans to hold a public hearing in June over how imported cars and car parts affect the national security.

If the US government decides to impose 25 percent of tariffs on the imported automobiles, the Korean automobile industry heavily relying on the US market will be hit hard.

Currently, Korea is the fifth largest auto importer to the US following Canada, Japan, Mexico and Germany. The annual exports of Korean cars and car parts to the US stood at $14.6 billion and $5.6 billion respectively last year.

By brand, Hyundai Motor and Kia Motors shipped around 600,000 units, GM Korea exported around 130,000 units and Renault Samsung sold nearly 120,000 units. As to Renault Samsung, a majority of the cars produced here are shipped to the US market.

Despite its heavy reliance, the Korean car exporters to the US saw a decline in exports for two straight years due mainly to growing competition and strong won. Last year, it fell a 9.3 percent from the previous year and this year will also be expected to be tough.

“(If high tariffs are imposed), Korean car makers, which have retained competitiveness in the US with low prices, will be affected harder than German and Japanese automakers,” said Lee Hang-koo, a senior researcher at the Korea Institute for Industrial Economics & Trade.

In order to respond to the US protectionism, the Korean government set up a taskforce with the private sector and discussed with government officials from the EU, Mexico, Canada and Japan, which are large exporters to the US.

By Shin Ji-hye/The Korea Herald (shinjh@heraldcorp.com)

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