On the 23rd, Toyota's stock price jumped 14.34%. The news that the United States lowered the tariff rate imposed on Japanese automobiles from 27.5% (including the existing tariff rate of 2.5%) to 15% stimulated investor sentiment. Although President Donald Trump effectively cut the basic tariff of 2.5%—which he inflated tenfold—by 10 percentage points, the market cheered simply because uncertainty was alleviated.
Hyundai Motor and Kia's stock prices also rose by 7.51% and 8.49%, respectively, on the same day. Coincidentally, this was about half the increase in Toyota's stock price. It seems that expectations for lower tariff rates for automobiles in Korea, like Japan, are balanced by concerns about whether the trade negotiations will go well.
If the tariff rate for automobiles in Korea were at the same level as that of Japan, both Hyundai Motor and Kia would see their annual burden reduced by trillions won. Kang Seong-jin, a researcher at KB Securities, estimated that, based on a tariff rate of 25%, the tariff costs from this year to 2026 would be 5.5 trillion won for Hyundai Motor and 3.4 trillion won for Kia. If the tariff rate is lowered to 15%, the burdens for Hyundai and Kia during the same period could decrease to approximately 3.7 trillion won and 2.7 trillion won, respectively.
In particular, U.S. automakers General Motors, Ford, and Stellantis have requested a reduction in the tariff rates applied to them in Canada and Mexico, claiming they are at a disadvantage as a result of the negotiations with Japan. If President Trump lowers the tariff rates applied to Mexican automobiles and auto parts, Hyundai Motor and Kia's tariff burdens are expected to decrease an additional 3.6 trillion won and 2.2 trillion won over the two-year period. In terms of operating profit, Hyundai Motor can expect an improvement of 1.9 trillion won and Kia can expect 1.2 trillion won by 2026.
Of course, this is provided that the trade negotiations conclude successfully. If the automobile tariff rate is set above 15%, the Korean automotive industry will have to solve the problem of either absorbing the additional costs to maintain price competitiveness or passing the prices onto U.S. consumers while sustaining sales volume.
This issue is not limited to the automotive sector. Regarding tariffs on semiconductors and pharmaceuticals promoted by President Trump, Japan announced that it has received 'most-favored-nation treatment.' This means that the U.S. will apply the lowest tariff rates it imposes on other countries. If Korea cannot secure the same conditions, it could also become a burden in terms of price competitiveness.
It remains uncertain how much of this risk has been reflected in the previously strong domestic stock market. Global investment bank Morgan Stanley noted, 'There are two uncertainties regarding whether Korea can agree to mutual tariffs lower than 25% in negotiations with the U.S. and whether Korean automobiles can receive a 15% item tariff like Japan's,' adding that 'if the actual negotiation results differ from those of Japan, an unfavorable environment could be created for Korean corporations, so they must respond cautiously.'
The delegation, including Deputy Prime Minister and Minister of Economy and Finance Ku Yoon-cheol, is set to depart for the United States today. We hope they can achieve results.