On March 26, President Donald Trump officially announced that starting April 2, a 25% tariff will be imposed on all foreign-made cars imported into the United States. As a result of this tariff, U.S. consumers will face significantly higher prices when purchasing vehicles.
The measure targets all foreign-made cars, but it will primarily affect vehicles produced in countries like South Korea, Japan, Europe, Mexico, and Canada.
During a press conference at the White House Oval Office on the same day, President Trump stated, “What we’re going to do is impose a 25% tariff on every car that isn’t made in America.” He added, “We will impose tariffs on countries that have taken jobs and wealth from us over the past few years. Often, friends have been far worse than foes, and this (tariff imposition) is actually quite mild.”
Trump also signed an executive order, saying, “With this foreign car tariff, we expect an annual revenue increase of $100 billion.”
This move by President Trump, aimed at reviving the U.S. auto industry, is expected to deal a significant blow to countries like South Korea, where automobiles are the top export to the U.S.
While automakers from South Korea, Japan, and Europe—such as Hyundai Motor Group—produce vehicles in U.S. factories, a substantial portion of the cars they sell in the U.S. are still manufactured in their home countries, Mexico, or Canada, making the impact of this tariff inevitable.
U.S. car buyers are poised to be the biggest victims of this tariff policy. The Wall Street Journal (WSJ) predicts that the sales price of foreign-made cars sold in the U.S. will rise by at least $3,000 to $5,000 due to the tariff. While the federal government may secure additional tax revenue, this money will ultimately come out of consumers’ pockets.
The WSJ pointed out that going forward, consumers will need to check whether the vehicle they want to purchase is subject to the 25% tariff before making a decision.
Under the U.S.-Korea Free Trade Agreement (FTA), the U.S. has applied zero tariffs to Korean passenger cars, including electric vehicles, since 2016. Last year, South Korea’s total auto exports amounted to $70.789 billion, with exports to the U.S. accounting for approximately 49% ($34.744 billion). Automobiles are South Korea’s top export to the U.S., and in 2023, South Korea ranked as the fourth-largest exporter of cars to the U.S., following Mexico, Japan, and Canada.
With the 25% tariff on automobiles, combined with the “reciprocal tariffs” to be announced on April 2 for individual countries, Korean automakers’ price competitiveness in the U.S. market will inevitably weaken compared to American manufacturers.
Although Hyundai Motor Group plans to steadily increase production in the U.S., many popular models under the Hyundai, Kia, and Genesis brands are still produced in South Korea.
On March 26, Hyundai Motor Group held the groundbreaking ceremony for its third U.S. production site, the “Hyundai Motor Group Metaplant America” (HMGMA) in Georgia. The company has decided to expand the plant’s production capacity from the initially planned 300,000 units to 500,000 units. Hyundai aims to increase its total U.S. production capacity from the current 700,000 units to 1.2 million units in the future.
The auto tariff is the third item-specific tariff imposed by President Trump since the start of his second term on January 20 this year. Previously, the Trump administration imposed a 25% tariff on steel, aluminum, and derivative products made from steel and aluminum imported from all trading partners, effective from March 12.
President Trump specified “April 2” as the implementation date for the auto tariff.
April 2 also marks the day when Trump has pledged to impose “reciprocal tariffs” on all countries worldwide, taking into account their tariff rates and non-tariff barriers against the U.S. Reaffirming this plan, Trump emphasized that he would impose reciprocal tariffs “on every country” without exception.