February 18, 2019

S. Korea ramps up efforts to deter Trump’s proposed tariffs on cars

PUBLISHED : July 01, 2018 - 16:02

UPDATED : July 01, 2018 - 16:08

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[THE INVESTOR] The South Korea government has delivered its opposition to the Trump administration’s gestures to up tariffs on imported cars, claiming the current trade conditions are mutually beneficial and imposing tariffs may negatively boomerang on the US economy, according to Seoul’s Trade Ministry on July 1.

Reflecting the growing anxiety of the local auto industry, Minister of Trade, Industry and Energy Paik Un-gyu visited Washington last week to deliver Seoul’s stance on the issue to the related US politicians and business representatives. 

During consecutive meetings held from June 27 to 29, the minister expressed concerns the proposed auto tariffs could undermine the mutually beneficial trade environment, fostered by the Korea-US Free Trade Agreement, the ministry said in a release.

In his meeting with Ed Royce, chair of the House Foreign Affairs Committee, Paik cited “free and fair trade bases between the two nations should not be damaged,” from the bilateral trade deal statement.

In May this year, US President Donald Trump ordered the Commerce Department to investigate auto imports for potential cases of trade penalties, hinting at the possibility of a 25 percent tariff at maximum.

Paik also met with Johnny Isakson, the senior senator from Georgia, and Terri Sewell, a representative for Alabama, where Hyundai Motor and Kia Motors run their auto plants, respectively.

“The possible high tariffs will increase car parts prices in the US and thus reduce demand and production of cars, ultimately leading to negative impacts on the regional economy,” Paik said.

Currently, the Korean car industry has invested more than $10 billion in the US, mainly in Georgia and Alabama, creating more than 110,000 jobs.

He also met with Matt Blunt, president of the American Automotive Policy Council, representing the US three carmakers, Ford, General Motors and Fiat Chrysler Automobiles. During the meeting, Paik said the high tariffs on imported cars may also negatively affect the US car industry given its growing imports to the Korean auto market.

The US car imports to Korea have risen from 13,473 units in 2011 to 54,620 units in 2017, according to the US automotive organization, Ward.

The US government is slated to announce the investigation results around September after holding a public hearing next month.

If the US decides to slap the 25 percent tariff on the imported cars, the Korean car industry will face huge damages.

Korea’s exports to the US last year stood at around $15.7 billion in cars and $7.9 billion in car parts. If the high tariff is imposed, the nation’s car parts industry is estimated to see losses of $12.2 billion over the next five years, according to the car parts industry.

On Sunday, the nation’s largest carmaker Hyundai Motor delivered a letter to the US Department of Commerce saying if the US imposes 25 percent tariffs on imported cars, it will increase Hyundai’s annual production costs in the US by 10 percent. This will ultimately reduce the firm’s profitability, car sales and thus related jobs in the US.

Currently, Hyundai Motor runs 835 dealerships in the US, directly hiring 25,000 dealers and indirectly hiring 47,000 employees.

Last week, a coalition representing major foreign automakers including Toyota, Volkswagen, BMW and Hyundai said the tariffs would harm automakers and US consumers.

“Such duties would raise prices for American consumers, limit their choices, and suppress sales and US production of vehicles,” wrote the Association of Global Automakers.

By Shin Ji-hye/The Korea Herald (

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