Hyundai Boosts U.S. Manufacturing to Align with Trump’s Trade Policies
During the U.S.-Japan summit on Feb. 7, U.S. President Donald Trump announced his consideration of imposing tariffs on automobiles, raising concerns about potential impacts on South Korea’s economy. This announcement comes amid Trump’s dissatisfaction with the European Union’s (EU) trade practices, particularly their limited importation of American cars and agricultural products. Trump hinted at imposing auto tariffs, which could have significant repercussions for South Korea, a major exporter of automobiles to the U.S.
Last year, South Korea exported 1.43 million vehicles to the United States, accounting for 51.5% of its total automobile exports. In monetary terms, these exports amounted to $34.7 billion, representing 27.2% of South Korea’s total exports. Conversely, Korea imported 799 from South Korea, valued at $2.1 billion. The potential introduction of an export quota system or import tariffs on automobiles by the U.S. could disrupt this trade balance.
Hyundai Motor Group, a key player in South Korea’s automotive industry, is actively considering increasing production at its U.S. factories to mitigate the impact of potential reciprocal tariffs. The company’s Alabama plant has a production capacity of 400,000 units, while its Georgia plant can produce between 300,000 to 350,000 units annually. Hyundai’s strategic moves in U.S. manufacturing facilities are part of a broader effort to align with U.S. trade policies and reduce reliance on imports.
In an effort to build a favorable relationship with the Trump administration, Hyundai appointed Sung Kim, an American diplomat of Korean descent who has served as the U.S. Special Representative for North Korea Policy since 2021, and previously from 2014 to 2016, as the group’s president of external cooperation. These moves reflect Hyundai’s proactive approach to navigating the complex trade landscape under the Trump administration.
Trump’s announcement of plans to impose reciprocal tariffs globally on Feb. 10 to 11 could significantly affect South Korea’s economy. The Korea Institute for International Economic Policy’s report, ‘Ten Years of the Korea-U.S. FTA: Achievements and Implications,’ highlights that as of 2022, tariffs have been abolished on 98.3% of Korean goods and 99.2% of U.S. goods. However, the U.S. recorded a trade deficit of $66 billion with South Korea last year, ranking 8th among countries with which the U.S. has a trade deficit.
Trump’s rhetoric emphasizes a protectionist stance, as he stated, “An eye for an eye, a tariff for a tariff, will be passed by Congress.” He further mentioned the possibility of replacing the global 10% to 20% universal tariffs with reciprocal tariffs. Jamieson Greer, a candidate for the U.S. Trade Representative, noted that research and consideration are needed to determine if universal tariffs can reverse the trade deficit.
The potential imposition of tariffs on South Korean automobiles is set against a backdrop of complex U.S.-South Korea trade relations, shaped significantly by the Korea-U.S. Free Trade Agreement (KORUS FTA). Revised in 2018, the agreement extended the 25% tariff elimination deadline on U.S. trucks to 2041, reflecting ongoing efforts to address trade imbalances.
