With 15% tariffs locked in, Hyundai and Kia face tough road in U.S.

Published: 31 Jul. 2025, 18:36Updated: 31 Jul. 2025, 18:37

• SARAH CHEA
• chea.sarah@joongang.co.kr

Korea JoongAng Daily

With 15% tariffs locked in, Hyundai and Kia face tough road in U.S.

5 min

Audio report: written by reporters, read by AI

U.S. President Donald Trump, the U.S. flag and the word ″Tariffs″ are depicted in an illustration. [REUTERS/YONHAP]

 
[NEWS ANALYSIS]
 
The United States’ 15 percent tariffs on Korean goods have helped it avoid the worst but still diminished its FTA-derived edge, leaving the industries at a disadvantage against its foremost rival, Japan and the European Union.
 
Perhaps most consequentially, Korean automakers like Hyundai Motor and Kia have lost their 2.5 percent tariff advantage, undermining their competitiveness against Japanese and European brands — the three big auto exporters competing in the United States. 
 
Korea had long enjoyed zero tariffs under the FTA. Japan and the EU had a 2.5 percent rate, but the three now must endure a uniform 15 percent.
 

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“We strongly argued that, given the FTA, Korea should receive a 12.5 percent auto tariff to be on equal footing with Japan and the EU, but failed to persuade them,” Trade Minister Yeo Han-koo said during a press briefing Thursday, describing the outcome as “regrettable.”
 
Korea exported some 1.43 million vehicles to the U.S. market as of last year, ranking second after Mexico, narrowly ahead of Japan’s 1.37 million. The EU followed at around 758,000 units. The United States accounts for 20 percent of Korea’s exports, with more than half of that being automobiles.
 

From left, Minister of Trade, Industry and Energy Kim Jung-kwan; Deputy Prime Minister and Finance Minister Koo Yun-cheol; and Trade Minister Yeo Han-koo talk about the results of their trade talks with the United States during a press briefing in Washington on July 31. [NEWS1]

Dodging the bullet, but losing the price war
Hyundai and Kia, facing fierce competition from Toyota Motor and Volkswagen Group in the U.S. market, are left to absorb losses that are projected to exceed some 6 trillion won ($4.3 billion) annually.
 
Hyundai shares shrank 4.5 percent to close at 213,000 won on Thursday while Kia dropped 7 percent to 102,700 won, pressured by significant sell-offs from foreign and institutional investors.
 
Thanks to a 2.5 percent tariff advantage, Hyundai was able to maintain slightly lower prices than competitors in the U.S. market — a factor that propelled Hyundai to gain a foothold in the U.S. market and rise to become the third largest automaker globally.
 
The sticker price of the Hyundai Elantra sedan, known as the Avante in Korea, starts at $22,125 in the United States, slightly undercutting its rival, the Toyota Corolla, which is priced from $22,325, and the Volkswagen Jetta at $22.995.
 
The Genesis GV70 has a sticker price of $48,000, roughly 10 percent lower than the BMW X3’s $52,075 and Mercedes GLC’s $51,000.
 

Hyundai Motor cars await export at a port in Pyeongtaek, Gyeonggi, on July 31, the day when the United States cut its tariffs on Korean goods to 15 percent. [YONHAP]

 
“Hyundai will have to freeze the prices to defend its market share in the U.S. market, meaning it's the company that has to shoulder the losses,” said Kim Pil-soo, a professor of automotive engineering at Daelim University College.
 
“This negotiation is tantamount to a failure, from the perspective of automobile tariffs,” Kim added. “Increasing U.S. production seems inevitable, which aligns with what [U.S. President Donald] Trump intended.”
 
With the 15 percent tariff, Hanwha Investment & Securities projected that Hyundai and Kia's profit would deteriorate by some 5.6 trillion won. Eugene Investment & Securities similarly estimated losses of around 7.5 trillion won under the scenario.
 
Hyundai and Kia’s combined profit has already shed by 19.6 percent, or 1.6 trillion won, in the second quarter, impacted by 25 percent tariffs imposed in April.
 
“Enhancing the competitiveness of Korean-made vehicles has become increasingly important at the moment,” said a spokesperson for Hyundai Motor, adding that the firm would make “every effort to minimize the impact.”
 
General Motors now sees diminishing strategic value in its Korean plants. The company exports more than 87 percent of its Korean production to the U.S. market.
 

Ministry of Trade, Industry and Energy Kim Jung-kwan, left, greets U.S. Commerce Secretary Howard Lutnick for a tariff meeting in Washington, on July 25. [NEWS1]

Did Korea overcommit?
Given the size of Korea’s economy, some experts argue that its $450 billion offer was disproportionately generous compared to what Japan and the EU committed.
 
The $350 billion includes a massive $150 billion shipbuilding project spanning shipbuilding, equipment and maintenance, repair and overhaul, and $200 billion worth of investment funds that include direct investment, loans and guarantee programs.
 
That’s around 18.7 percent of its GDP and higher than Japan’s $550 billion pledge, which is just 13.7 percent of its $4.02 trillion economy.
 
“Japan’s GDP is more than twice the size of ours, and, by simple calculation, Korea’s commitment should have maxed out at around $250 billion — yet we went $100 billion over that,” said Joo Won, head of economic research at the Hyundai Research Institute.
 

A large crane stands at Hanwha Ocean’s headquarters in Geoje, South Gyeongsang, on July 31, the day when the United States cut its tariffs on Korean goods to 15 percent. [YONHAP]

 
U.S. Commerce Secretary Howard Lutnick said, regarding Korea's investment, that “90 percent of the profits will go to the American people” on X. 
 
The 50 percent tariffs on steel and aluminum remain unchanged, and sectoral tariffs on chips and biopharmaceuticals are still to be announced.
 
The Korean government, however, said the amount of direct investment and the relevant timeline have not been discussed yet. Details will be specified during the bilateral meeting between Trump and President Lee Jae Myung that is scheduled to take place within the next two weeks. 
 

Steel awaits export at a port in Pyeongtaek, Gyeonggi, on July 31, the day when the United States cut its tariffs on Korean goods to 15 percent. [YONHAP]

BY SARAH CHEA [chea.sarah@joongang.co.kr]