The United States government has announced its plan to impose significant tariffs on imported automobiles and semiconductors, affecting major South Korean companies like Hyundai and Samsung. U.S. President Donald Trump stated that a 25% tariff on imported vehicles will take effect as early as April 2, with additional sectoral tariffs on semiconductors and pharmaceuticals also being planned. While no specific dates have been given for semiconductor tariffs, the announcement has already set off concerns in the South Korean automotive and technology industries.
The new tariffs will directly impact South Korean automakers, particularly Hyundai Motor Group, which exports a large portion of its vehicles to the U.S. Hyundai and its subsidiary Kia sold approximately 1.7 million vehicles in the U.S. last year, with around 60% of those being manufactured in South Korea. Similarly, South Korean semiconductor firms, including Samsung Electronics and SK hynix, exported chips worth $10.6 billion to the U.S. last year, making semiconductors one of South Korea’s top export categories to America. With South Korean semiconductors making up about 7% of total U.S. chip imports, the anticipated tariffs could drive up costs for both the companies and their American buyers.
Hyundai Plans Expansion to Counter Tariffs
Hyundai Motor Group has been preparing for the possibility of increased U.S. tariffs by ramping up its production within the United States. The company aims to expand the capacity of its Hyundai Motor Group Metaplant America (HMGMA) in Georgia from 300,000 to 500,000 units per year. Additionally, Hyundai plans to maximize output at its Alabama and Georgia plants, which currently produce 356,100 and 340,000 vehicles per year, respectively.
The goal of this expansion is to reduce reliance on imported vehicles and instead manufacture more cars within the U.S. to avoid tariff costs. However, increasing production locally comes with its own challenges. Expanding manufacturing operations in the U.S. will require significant investment in facilities, workforce, and logistics. Industry experts indicate that shifting production locations involves substantial costs and long-term planning. For Hyundai and Kia, these expansions may take time before they fully offset the impact of the proposed tariffs.
Meanwhile, other auto manufacturers with South Korean production facilities, such as GM Korea, are also monitoring the situation. GM Korea exports around 84% of its vehicles to the U.S., making it highly susceptible to the new tariffs. Observers speculate that General Motors may shift some of GM Korea’s production to its U.S.-based factories to avoid added costs.
Semiconductor Industry Braces for Higher Costs
In addition to the automobile industry, South Korea’s semiconductor sector is facing potential setbacks from the proposed U.S. tariffs. Samsung Electronics and SK hynix, two of the world’s largest chipmakers, are now preparing for the financial impact of potential 25% tariffs on semiconductor exports.
Semiconductors are a crucial part of modern technology, used in everything from smartphones to computers and automobiles. The U.S. heavily relies on South Korean semiconductor manufacturers due to their dominance in producing high-quality memory chips. If new tariffs are implemented, American companies purchasing these chips may experience higher costs, which could lead to increased prices for consumer electronics.
Impact on U.S. Buyers and South Korean Manufacturers
Some industry insiders believe the effects of these tariffs might be limited due to the essential role South Korean semiconductor firms play in the global supply chain. Unlike the automotive industry, where the U.S. has alternative options for vehicle production, semiconductor manufacturing is heavily concentrated in a few countries, with South Korea being a key player. This means that even with higher tariffs, U.S. buyers may still depend on South Korean chips due to a lack of viable alternatives.
Despite this, the announcement of new tariffs has raised concerns among South Korean chipmakers, who are now assessing how best to navigate the potential increase in costs. Some companies are reportedly considering adjustments in pricing or shifting aspects of production to different regions to mitigate tariff-related expenses.
As the U.S. moves forward with its tariff plans, South Korean companies in both the automotive and semiconductor industries are working on strategies to manage the increased costs and maintain their competitive presence in the American market.