Shares of South Korean carmakers Hyundai and Kia fell on Thursday after US President Donald Trump said the US would charge a 15% tariff on imports from South Korea, including cars, as part of a trade deal.
While the agreement reduces vehicle tariffs from 25%, it removes the 2.5 percentage point advantage in tariffs that South Korean vehicle makers had enjoyed over Japanese rivals under the Korea-US free trade deal.
Some analysts said the share falls may have been driven by profit-taking as news of the tariffs was already factored in after South Korean carmaker shares surged last week, following news that Trump agreed to reduce Japanese vehicle imports to 15%, a move that stoked optimism about a similar deal for Seoul.
South Korea’s vehicle association said the tariff cuts were “fortunate” and said they removed uncertainty and created a level playing ground with Japanese and European rivals.
Hyundai said the deal “validates our unwavering confidence in the US market and our commitment to US manufacturing”.
Hyundai announced a $212bn investment in March in the US with Trump at the White House, including a $5.8bn steel factory and an expansion of Hyundai’s new car factory in Georgia.
Before Washington imposed 25% vehicle tariffs in April, there were zero tariffs on most South Korean vehicle imports under a bilateral trade deal, while there was a 2.5% tariff on Japanese car imports.
South Korean negotiators demanded 12.5% vehicle tariffs, but Trump wanted the rate to be 15%, the presidential office said.
“The non-tariff premium for Korean automakers is gone,” said Shin Yoon-chul, an analyst at Kiwoom Securities.
But James Hong, head of mobility research at Macquarie, said the difference is “manageable,” given the brand value and more sales of higher-price vehicles for Korean carmakers.
They are also better positioned than US carmakers, which have been paying up to 25% on vehicles imported from Mexico, said Ester Yim, an analyst at Samsung Securities.
Hyundai shares ended down 4.5% and Kia stock lost 7.3%.
Reuters
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