The US government has confirmed that tariffs on vehicles imported from South Korean have been reduced to 15%, down from the 25% duty rate introduced earlier this year, effective retroactively from the beginning of November.
This decision follows a top-level meeting between the two countries at the end of October, when US President Donald Trump and South Korean President Lee Jae Myung met on the sidelines of the Asia-Pacific Economic Cooperation (APEC) Summit in South Korea where they announced a tentative trade agreement, after their teams of negotiators ironed out some key outstanding issues – including South Korea’s commitment to investing US$350 billion in the US.
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US Commerce Secretary, Howard Lutnick, released a statement this week saying the South Korean government’s implementation of the strategic-investment legislation in parliament was “a key step that ensures US industry and workers will see the full benefit of President Donald Trump’s trade deal with South Korea. In response, the US will lower certain tariffs under the deal, including auto tariffs, to 15%, effective November 1.”
This decision brings South Korea in line with Japan, which had previously negotiated a 15% import duty for its vehicles — effective from August of this year. The two countries are major vehicle exporters to the US, with 1.5 million and 1.6 million units shipped last year respectively, worth a combined US$ 80 billion. Both countries have vowed to step up their investments in the US. Vehicles made in the EU are also subject to a 15% US import duty, while for UK-made the duty has been set at 10%.
Confirmation of the lower tariff rate has eased a significant source of uncertainty among South Korea’s largest vehicle manufacturers. The decision significantly improves the competitiveness of South Korean vehicles exported to the US, which should be reflected in Hyundai and Kia’s fourth-quarter earnings reports. It also takes the immediate pressure off GM Korea, South Korea’s third-largest automaker, which is almost entirely dependent on exports to the US.
Hyundai Motor’s share price has increased 11% since the US tariff statement was released earlier this week, while Kia’s share price is up by 7%.
