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.
Uncertain timeline for US auto tariff cut deepens Korean firms' concerns
Kia pickup trucks are parked for export at a port in Pyeongtaek, Gyeonggi Province, Thursday. Yonhap
By Lee Min-hyung
Korea’s major carmakers and auto parts firms remain under pressure from a 25 percent U.S. tariff, even after the two countries signed a long-awaited agreement last week to reduce it to 15 percent.
Major auto exporters, hit hard by the trade penalty in their second-quarter earnings, welcomed the reduced tariff rate. Hyundai Motor and Kia suffered operating profit losses of 828.2 billion won ($596 million) and 786 billion won, respectively.
However, U.S. President Donald Trump has yet to sign an immediate administrative order to implement the new rate, leaving local players in limbo.
The uncertainty is clouding the outlook for third-quarter earnings of Korean carmakers and auto parts manufacturers, as their exports to the United States are still subject to the previous 25 percent tariff.
Officials from the Ministry of Trade, Industry and Energy were unavailable for comment Friday, but the government appears to be struggling to fine-tune details with the U.S. on the timeline to implement the reduced auto tariff.
With no means to act against the U.S. authorities, officials from major Korean auto firms remain anxious. They expressed hope that the Korean government will engage in timely talks with the U.S. to help local companies minimize their tariff-triggered earnings shock.
“A tariff cut of 10 percentage points is never a small figure,” an industry official said. “We expect the U.S. to take additional administrative steps for timely implementation of the 15 percent auto and auto parts tariff on Korean products.”
Other industry officials also said the delayed tariff cut will deal a blow not only to exporters’ profits, but their future-planning.
“Another major risk is that companies will continue to face management uncertainties in areas such as their budget allocation and future U.S. strategies,” another auto industry official said.
“We urge both countries to rapidly come to terms with each other over the timeline for the 15 percent auto tariff implementation,” the official said.
Last week, Korea and the U.S. clinched a long-delayed tariff agreement, under which Korea agreed to invest $350 billion in U.S. industries, including shipbuilding. The U.S. also agreed to cut its “reciprocal” tariff on Korean product imports from 25 percent to 15 percent.
The reciprocal duty cut has become effective since Thursday (local time).