The Trump administration has lowered tariffs on Japanese automobiles from the existing 27.5 percent to 15 percent starting on September 16, effecti...
Cars for export are parked at Pyeongtaek Port in Gyeonggi Province on September 16, as the Trump administration announced through the Federal Register on the 15th that tariffs on Japanese automobiles and auto parts imported into the U.
S. will be lowered from the current 27.5 percent to 15 percent. / Yonhap News The Trump administration has lowered tariffs on Japanese automobiles from the existing 27.5 percent to 15 percent starting on September 16, effectively erasing the price advantage that Korean automakers had enjoyed in the U.S. market since the signing of the Korea–U.S. Free Trade Agreement in 2012. This is because Korea remains subject to the 25 percent import tariff that Washington began imposing on automobiles in April. According to the websites of Hyundai Motor Group and Toyota Group, the representative automakers of Korea and Japan, respectively, the local base prices of the Sonata and Camry LE gasoline sedan models competing in the U.S. market are listed at US$27,300 and US$29,000. Assuming that state sales taxes, dealer and manufacturer incentives, and inventory conditions are equal, Toyota’s Camry LE could be priced down to $26,160 following the U.S. tariff cut. This creates a situation where the Camry becomes cheaper than the Sonata. The same is true in the SUV segment. Kia’s Sportage Hybrid model competes against Toyota’s RAV4 Hybrid LE . With the 15 percent tariff applied, the RAV4 Hybrid LE’s price could theoretically fall to $29,630. In contrast, Hyundai Motor Group cannot launch a “counteroffensive.” Although Seoul and Washington had agreed to lower tariffs on Korean automobiles to 15 percent, follow-up negotiations have stalled. As a result, Hyundai and Kia are caught in a dilemma between defending market share and securing profitability. Lee Hang-gu, a research fellow at the Korea Automotive Technology Institute, explained, “Before the U.S. began imposing tariffs globally, Korean cars entered duty-free while Japanese cars faced a 2.5 percent tariff. Even if Korea lowers tariffs to the same 15 percent level as Japan, that still means an increase to 15 percent for Korea and 12.5 percent for Japan.” This means the relative shock is inevitably greater for Korea. Prospects are dim for Korea’s tariffs to be lowered to Japan’s level within this year. On the 16th, IBK Investment & Securities predicted that the 25 percent tariff currently applied to Korean cars and parts exported to the U.S. is unlikely to be resolved before year-end. Researcher Lee Hyun-wook estimated, “If the current tariff levels persist, Hyundai and Kia will each face an additional monthly cost burden of about 400 billion won and 300 billion won, respectively. The longer the tariff cuts are delayed, the heavier the burden will become.” Due to the tariff impact, Hyundai’s and Kia’s operating profits in the second quarter fell 16 percent and 24 percent year-on-year, respectively. With their price competitiveness eroded compared to rivals, raising vehicle prices has become increasingly difficult. An auto industry official said, “With growing uncertainty in the U.S. automobile sector, raising prices risks losing market share, while freezing prices will likely worsen profitability, leaving companies in a tough bind.” Hyundai Motor Group is scheduled to hold a “CEO Investor Day” in New York on the 18th , where it plans to announce its strategies to respond to tariffs and to the elimination of U.S. subsidies for electric vehicles.
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