U.S. President Donald Trump (Image courtesy of President-elect Donald Trump’s inaugural committee)
SEOUL, Feb. 3 (Korea Bizwire) — The South Korean auto industry is bracing for significant disruptions after U.S. President Donald Trump announced new universal tariffs on the country’s largest trading partners, including Canada, Mexico, and China.
The move is expected to have immediate financial implications for South Korean automakers and suppliers, particularly those that have expanded production into North America to facilitate U.S. exports.
Industry analysts warn that the imposition of additional tariffs on U.S.-bound South Korean car exports could further strain Hyundai Motor Group and other major players, prompting them to consider alternative export strategies.
Potential Disruptions to Hyundai’s North American Operations
The New York Times reported that thousands of businesses across Asia and Europe have invested billions in North American supply chains in recent years, only to face major setbacks under Trump’s latest tariff measures.
Among the most vulnerable firms is Hyundai Motor Group, which operates multiple production facilities in Mexico, including Kia, Hyundai Mobis, and Hyundai Wia plants in Monterrey.
Kia’s Mexico plant produced approximately 253,000 vehicles from January to November 2024, including 175,000 K3 sedans, 64,000 K4 sedans, and 14,000 Tucson SUVs. Of these, 128,000 K3 units were exported to the U.S., underscoring the potential financial strain if additional tariffs are imposed.
In response, Hyundai is reportedly evaluating several contingency plans, including diversifying exports to Canada, South America, and Europe, or relocating certain production operations to the U.S.
During a recent earnings call, Kia’s Executive Vice President for Investor Relations, Jung Sung-kook, acknowledged the challenge, stating, “If Mexico faces export restrictions, we may need to increase shipments to Canada or adjust our supply chain management strategies to mitigate the impact.”
This photo shows newly produced vehicles from Hyundai Motor in Ulsan waiting to be shipped to customers. (Yonhap)
Tariff Impact on Auto Parts Suppliers
Auto parts manufacturers are also at risk. Hanon Systems, a major supplier, is set to begin operations at its electric compressor plant in Woodbridge, Ontario, in the first half of 2025, which could face higher costs due to U.S. trade restrictions. The company also operates a heating, ventilation, and air conditioning (HVAC) module plant in Belleville, Canada, adding to concerns over potential financial losses.
Broader Economic Implications for South Korea
Beyond the auto sector, South Korea’s broader export-driven economy—where exports account for 90% of GDP—faces serious risks. The U.S. is South Korea’s second-largest trading partner, accounting for 18.7% of total exports, with automobiles making up nearly half of those shipments.
If the U.S. imposes broader tariffs on South Korean goods, the economic impact could be substantial. A report by the Korea Institute for International Economic Policy projected that if universal tariffs were applied to South Korean exports, direct losses could reach $15.2 billion (22.2 trillion won), with indirect effects reducing third-country exports by an additional $7 billion to $8.9 billion (10.2 trillion to 13 trillion won).
In total, South Korea could face export losses of approximately $24.1 billion (35.1 trillion won).
Need for Strategic Economic Diplomacy
Experts stress that South Korea must reassess its economic strategy in light of growing protectionist policies in the U.S. Jang Sang-sik, head of international trade research at the Korea International Trade Association, emphasized the need for proactive engagement.
“South Korea must move beyond relying on its status as a free trade agreement (FTA) partner and close ally of the U.S.,” he said. “Now is the time to present substantial economic and industrial proposals to counteract these measures.”
Given the U.S. trade deficit with South Korea, analysts predict that American tariffs may target sectors such as automobiles more aggressively. South Korean automakers and policymakers are now weighing strategic responses to minimize economic fallout while maintaining their foothold in the crucial North American market.
Kevin Lee (kevinlee@koreabizwire.com)
