Lee Min-hyung joined The Korea Times in 2014 and has worked as a journalist mainly in Korea’s finance, tech and automotive industry. He specializes in content creation, breaking news and in-depth analysis currently on transportation and mobility. You can reach him via mhlee@koreatimes.co.kr.
Trump’s auto parts tariff feared to weaken Korea’s exports
U.S. President Donald Trump walks after disembarking from Air Force One at Palm Beach International Airport in West Palm Beach, Fla., Thursday (local time). Reuters-Yonhap
By Lee Min-hyung
The United States’ 25 percent auto parts tariff is feared to weigh heavily on Korea’s exports amid the growing strategic importance of the U.S. for local components manufacturers, according to data and industry officials on Tuesday.
The U.S. is Korea’s largest auto parts trade partner. Korean vehicle components makers, particularly in areas such as batteries and electrified parts, face increased risks due to potentially shrinking demand from the world’s largest economy following the auto parts tariffs that took effect on Saturday, according to the Ministry of Industry, Trade and Energy.
As of 1 p.m. Saturday (KST), the U.S. imposed a 25 percent tariff on imported auto parts including key components such as engines and transmissions.
The U.S. administration announced relief measures on April 29, reducing duties for one year on car parts accounting for 15 percent of the value of a vehicle assembled in the United States. Korean auto parts companies' high exposure to the U.S. market is still stoking fears over potential losses.
According to data from the Korea International Trade Association (KITA), Korea’s proportion of auto parts exports to the U.S. has been on the rise in recent years. The figure reached 29.5 percent in 2020, but soared to 36.5 percent last year.
This was driven by growing demand for batteries, motors and other parts for electric vehicles (EVs). The electrified parts accounted for the largest segment in Korean auto parts exports to the U.S., with their combined value reaching some $3 billion last year.
As the tariff was imposed on auto parts imports, there is a high likelihood that demand will decline due to the tariff-induced price hikes, thereby reducing Korean firms’ exports to the U.S.
“Auto parts makers have no choice but to increase their localized production in the U.S. to minimize the repercussions from the upcoming tariff,” an official from the industry said. “However, it is realistically impossible for them to build more production lines there in a short period of time.”
Some argue that auto parts makers should keep considering ways to diversify their supplies to other countries, so they can offset possible earnings declines in the U.S.
“Receiving a tariff exemption in the U.S. by localizing production is not a cure-all,” an official from an auto parts manufacturer said.
“For instance, local tire firms consider it inefficient in terms of earnings to build more plants in the U.S., as they can gain more by reducing their earnings reliance on the U.S. and increasing sales in Europe or other territories.”