Trump reaffirms car tariff push, sends jitters to Korea's auto industry

Just months after the US surprised trading partners with steel and aluminum tariffs, US President Donald Trump over the weekend reaffirmed his push to slap a 25 percent tariff on imported vehicles under Section 232 of the Trade Expansion Act.

Trump‘s latest push to implement higher tariffs of 25 percent from the current 2.5 percent has ignited a trade war, intensifying opposition and woes from the global auto industry.

Export-dependent South Korean automakers and government officials have approached the US government to avoid the tariffs, which, if imposed would inevitably lead to job cuts and downsize future investments in the US.

Four local automakers -- Hyundai Motor, Kia Motors, Renault Samsung Motors, and GM Korea -- exported a total 845,319 units to the US last year, which equated to roughly 33 percent of total vehicle exports, according to data from Korea Automobile Manufacturers Association.

Hoping to escape the tariffs, Hyundai Motor submitted a written comment to the US Department of Commerce last Friday, noting that 25 percent tariffs would push up annual production cost by 10 percent, ultimately downsizing employment and plans to invest $380 million in the Alabama plant.

Hyundai operates 835 dealerships across the US, and the firm and its partner suppliers are responsible for a total 25,000 jobs and indirectly employing 47,000 people.

In the written comment Hyundai added, its exports do not pose a threat to the US’ national security, citing declined US sales and product portfolio mainly made up of sedans.

Among its models, Hyundai Motor ships SantaFe midsize SUV, Sonata sedan, Avante and high-end brand Genesis sedans to the US.

Last year Hyundai exported 306,935 units to the US, about 31.8 percent of its total overseas exports, KAMA said.

According to a report by Moody’s on US auto tariffs, Hyundai and Kia‘s plans to boost production in the US and reduce imports won‘t do much to mitigate the impact of tariffs.

The government also did its part with the Minister of Trade, Industry and Energy Paik Un-gyu, during his trip to Washington, reportedly asking for US support on grounds that US’ concerns regarding vehicle imports had been factored in the revised KORUS FTA.

Car tariffs will deal a significant blow to Renault Samsung Motors, the South Korean unit of French carmaker Renault S.A., which largely depends on US exports for sales.

It exported 123,202 units to the US, mostly Nissan Rogue SUV produced at the Busan factory, surpassing 100,537 units sold here in 2017, the company said.

Renault Samsung Motors sold 264,037 units here and overseas last year.

Scrambling to get back in the game, GM Korea, the local unit of the US giant, would also be hit by tariffs, discouraging exports of Chevy Trax SUV and Spark compact car manufactured here.

“Tariffs on imported vehicles and parts would be negative for nearly every group in the industry -- automakers, parts suppliers, car dealers and even transportation companies -- as it rippled across the globalized supply chain, which we forecast will produce about 96.7 million light vehicles this year,” said Bruce Clark, Moody‘s Senior Vice President in a statement last week.

The Korea International Trade Association and Korea Automobile Manufacturers Association sent comments to the US government, underlining that vehicle imports from Korea do not threaten their national security.

By Kim Bo-gyung (lisakim425@heraldcorp.com)