Korea has agreed to a 15% tariff rate on automobiles through negotiations with the United States. Although this is lower than the 25% imposed by the U.S. since April, a tariff that did not exist before April (0%) has now been introduced. The 15% tariff is on par with Japan and Europe, but since Japan and Europe previously paid a 2.5% tariff, Korea effectively reduced its tariff by 2.5 percentage points (P) compared to these countries.
Kim Yong-beom, director of the presidential policy office, said in a briefing at the presidential office in Yongsan, Seoul, on the 31st, "We did our best to negotiate to lower the automobile tariff to 12.5%, but the U.S. has insisted that it must be uniformly set at 15%."
On the 22nd, Japan and the United States agreed to set the tariff rate on Japanese automobiles exported to the U.S. at 15%. The European Union (EU) also agreed to set mutual tariff rates at 15% in the tariff negotiations with the U.S. that were concluded on the 27th. The tariffs on Japanese and EU automobiles increased from 2.5% to 27.5% and have now been reduced to 15%.
As the tariff on Korean automobiles aligns with that of Japan and Europe, the price competitiveness of Hyundai Motor and Kia has weakened. Korea previously had no automobile tariffs under the Korea-U.S. Free Trade Agreement (FTA), but the Donald Trump administration imposed a 25% item-specific tariff starting in April.
The 2.5% tariff, which previously distinguished Japanese and European cars, significantly aided Hyundai Motor and Kia's entry into the U.S. market. Hyundai Motor Group was able to establish its premium brand Genesis in the U.S. by securing price competitiveness against German luxury brands like Mercedes-Benz and BMW.
Currently, the mid-size sedan Toyota Camry is being sold in the U.S. for $28,700 to $36,425, while the Honda Accord is priced at $28,295 to $35,600. The Hyundai Sonata ranges from $26,650 to $36,745, and the Kia K5 is priced between $27,190 and $34,690. The prices of the Sonata and K5 are lower than those of the Camry and Accord for the base trim.
An official from the completed vehicle industry noted, "Japanese companies like Toyota entered the U.S. market much earlier than Hyundai Motor and Kia, and customer loyalty regarding quality is also high."
With the loss of the FTA tariff benefits, Korean auto manufacturers are in a situation where they need to reconsider their strategies. In the case of Hyundai Motor, the local production rate of their vehicles sold in the U.S. is currently in the 40% range. Toyota produces more than half of its volume locally.
Hyundai Motor Group established and began operations last October at a factory in Georgia, the Metaplant America (HMGMA), dedicated to eco-friendly vehicles. Currently, this factory produces two types of electric vehicles, the Ioniq 5 and Ioniq 9. Since Japanese companies like Toyota sell almost no electric vehicles in the U.S., there is a strong opinion that hybrid vehicles competing with Japan should be quickly introduced into the production line at Metaplant America.
A representative from Hyundai Motor Group stated, "With the 15% tariff in effect, enhancing the competitiveness of Korean-made automobiles has become crucial. We plan to pursue various measures to minimize the impact of the tariff."