U.S. President Donald Trump has warned that he will impose a 25% tariff on imported automobiles, raising concerns about General Motors (GM) withdrawing from the Korean market for the first time in seven years. As GM exports about 84% of its production volume in Korea to the United States, if the tariff becomes a reality, there will be no reason to maintain production plants in Korea.

According to major foreign media on the 18th (local time), President Trump stated in a press conference at his Mar-a-Lago residence in Florida that "the tariff rate for automobiles to be announced on April 2 will be around 25%."

U.S. President Donald Trump announces a 25% tariff on imported cars, increasing the possibility of GM Korea's withdrawal from South Korea. The photo shows the old GM Korea Gunsan factory's shipping office. The faded Chevrolet logo remains. /Courtesy of Jin Sang-hoon

He added, "I want to give corporations time to come to America. If they build factories in America, there will be no tariff, so I'm trying to give them a bit of an opportunity." This indicates that he intends to impose tariffs on imported cars to encourage automobile corporations to move their production facilities to the United States.

In the case of Hyundai Motor and Kia, domestic demand is robust, so it is possible to continue operating the Ulsan plant even if there are disruptions to U.S. exports. Last year, Hyundai Motor sold 701,010 units domestically, which accounts for 17% of its global sales of 4,141,791 units. Kia also achieved 540,000 units in domestic sales, which represents 17.5% of its total sales of 3,089,457 units. If U.S. exports become difficult, Hyundai Motor and Kia may redirect their production to other countries.

GM Korea is in a different situation. GM Korea sold 49,559 units last year, with domestic sales accounting for only 5%, or 24,824 units. Of the remaining 474,735 units, 420,000, or 84% of the total production volume, were exported to the United States.

GM Korea's plant serves as a subcontracting base for manufacturing vehicles sold in the U.S., and if the Trump administration imposes a 25% tariff, there will no longer be a reason to operate the plant in Korea.

To sustain GM Korea, it must expand the production model of its domestic plants and increase sales; however, this is not an easy situation. This is because the domestic plant is only allowed to produce compact sport utility vehicles (SUVs).

Currently, the Bupyeong plant of GM Korea is producing only three models for domestic use: the compact SUV Trailblazer, the export model Trax crossover, and the Buick Envista. The GM Korea union has repeatedly demanded the allocation of electric vehicles to the Bupyeong plant, but GM's headquarters has rejected this.

GM previously pushed for a withdrawal from Korea in 2018. At that time, GM proceeded with a restructuring of its global business sites while transitioning to electrification, which also included Korea. The government invested 810 billion won in GM at that time, allowing GM to close only its Gunsan plant while deciding to continue its business in Korea.

GM considers withdrawal from South Korea in 2018, but the government supports public funds, maintaining the business sites while closing only the Gunsan factory. The photo shows GM Korea labor and management agreeing on business normalization and commemorating at the Incheon Bupyeong factory in 2018. From left, former President of GM Korea Kaher Kazem, President of GM International Barry Engle, former Democratic Party member Hong Young-pyo (Special Committee Chairman for GM Korea), and Vice President of the Cooperation Association Moon Seung. /Courtesy of GM Korea

Since 2018, GM has been operating its domestic business sites separately with the Bupyeong plant's production corporation and GM Technical Center Korea (GMTCK), which is responsible for research and development. If tariffs are imposed, there is a high likelihood that GM will withdraw the production corporation and only maintain GMTCK.

GM Korea implemented a voluntary retirement program at the end of last year. Initially aimed at senior executives, the program was later reported to have been expanded to include team leaders and below. This has led to interpretations in the industry that GM is undergoing significant restructuring with the possibility of withdrawing from Korea in mind following Trump's second administration.

An official from the finished vehicle industry noted, "In 2018, the government and the Industrial Bank acted quickly to decide on public funding to prevent GM's withdrawal, but now the government finds it difficult to function at 100%." He added, "If tariffs are actually imposed, the possibility of withdrawal is greater than it was seven years ago."

If GM withdraws from Korea, domestic parts suppliers are expected to suffer significant damage. According to the suppliers' organization for GM Korea, the primary suppliers of GM Korea numbered 276 as of last year. Including second and third-tier suppliers, the estimate rises to about 3,000.