South Korea rolls out support for auto industry hit by US tariffs

SEOUL – South Korea on April 9 announced emergency support measures for its auto sector, seeking to reduce the blow of

US President Donald Trump’s tariffs

on a sector that has seen years of sharply rising exports to the United States.

The moves include financial support for automakers as well as tax cuts and subsidies to boost domestic demand. The government also vowed efforts to negotiate with the US and help expand markets.

Mr Trump has announced a 25 per cent tariff on imported cars and light trucks starting on April 10. The tariff covers more than US$460 billion (S$622 billion) worth of imports of vehicles and auto parts annually, according to a Reuters analysis.

Manufacturers are expected to bear some of the tariff costs in the first year, but will eventually alter production and possibly cease importing certain low-volume models to the US market.

“Given the (lower) proportion of South Korean automakers’ local production in the United States, our industry is comparably at a disadvantage,” the government said.

The tariff is expected to cause “significant” damage to South Korean automakers and auto parts manufacturers, though it was difficult to come up with numerical estimates at the moment, the government added.

To help prevent any liquidity issues, it will raise policy financing support for automakers to 15 trillion won (S$13.7 billion) in 2025 from the 13 trillion won previously planned.

The government will lower taxes on automobile purchases to 3.5 per cent from the current 5 per cent until June 2025. It will raise electric-vehicle subsidies to 30 to 80 per cent of price discounts from the current 20 to 40 per cent, with the period extended by six months to the end of this year.

The government will also support automakers’ efforts to expand export markets in the “Global South”, which refers to less developed countries in Africa, Latin America and Asia, where demand is growing.

Regarding US tariffs, the government said: “We will do our best to ensure that the US does not treat South Korea in a disadvantageous way compared with other allies, through negotiations and by strengthening bilateral cooperation”.

In 2024, South Korea’s exports of automobiles to the US stood at US$34.7 billion, accounting for 49 per cent of its total auto exports.

Hyundai Motor said last week that it plans to keep sticker prices on its current model line-up steady for the next two months in an effort to ease customer concerns that the fallout from tariffs will impact dealer lots.

The programme runs until June 2, and comes after its US$21 billion investment in the US announced in March.

Hyundai Motor’s co-chief executive Jose Munoz said there were no plans to raise prices in the US.

Analysts said Mr Trump may have a preference to propose aggressive tariffs in order to extract quick concessions in a negotiation, adding that auto tariffs will put upward pressure on input costs for vehicles in general. Relative to the combustion engine vehicle supply chain, the electric vehicle (EV) supply chain would likely suffer a bigger impact due to a

dependence on China for EV parts

. REUTERS