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.
Korea urged to utilize GM as bargaining chip against Trump’s tariff threats
U.S. President Donald Trump arrives to speak at the Future Investment Initiative Institute summit in Miami Beach, Fla., Wednesday. AP-Yonhap
By Lee Min-hyung
84 percent of GM Korea's 2024 sales shipped to US
The Korean government and local carmakers should consider using General Motors (GM) Korea as a possible bargaining chip to counter the United States' ongoing threats of car import tariffs, experts said Thursday.
The suggestion comes amid U.S. President Donald Trump’s provocative rhetoric against car export partners. Trump said Wednesday (local time) he would announce tariffs on cars as well as lumber, semiconductors and pharmaceuticals "within the next month or sooner," one day after he threatened to place a tariff of around 25 percent on cars imported into the U.S. on April 2.
The 25 percent tariff is estimated to result in a combined operating profit decline of some 10 trillion won ($6.95 billion) to Hyundai Motor and Kia, according to data from KB Securities.
Experts say that nearly 90 percent of the vehicles produced by GM Korea are exported to the U.S., meaning that if Trump imposes the proposed tariffs on all car imports, the carmaker, which has served as a key export base for GM rather than focusing on domestic sales, would have little choice but to exit the Korean market.
GM Korea's annual sales last year totaled 499,559 units, marking a 6.7 percent increase compared to the previous year. Of this, exports accounted for 474,735 units, making up 95 percent of the total. The U.S. accounted for 88.5 percent of exports, with 418,782 units, meaning 83.8 percent of the total sales were directed to the U.S.
“Trump may not want U.S. firms to fall victim to his proposed auto tariffs, so Korea needs to emphasize the potential consequences of tariffs on GM Korea to the U.S.," Lee Ho-geun, an automotive engineering professor at Daedeok University, said.
He also advised the government to take the lead in the discussion, as it will be tough for local companies to hold any in-depth talks with U.S. authorities.
“Negotiations should be conducted primarily at the government level, but it's difficult for us to proceed due to the ongoing leadership vacuum,” Lee said, referring to the ongoing impeachment case against President Yoon Suk Yeol.
Local carmakers should also back up the government’s efforts and continue promising to create more jobs and expand investment in the U.S., according to the expert.
Kim Pil-soo, an automotive technology professor at Daelim University College, concurred, saying Trump is also well aware of GM’s complaints about the tariffs.
“Hyundai Motor Group will be a bigger victim of the proposed auto tariffs than GM Korea in terms of revenue, but the latter may have to end up shutting down its Korean operations due to the upcoming tariffs,” Kim said.
Aside from utilizing GM Korea as a bargaining chip, the professor also advised the government to sign a package deal with the U.S. to minimize local carmakers' losses.
“Details on the possible package deal include increasing imports of U.S. energy sources,” he said.
Korea should focus on minimizing the fallout from the tariffs by showing its willingness to clinch an “all package deal” not only in the automotive sector but across other industrial sectors as well, according to the professor.
“As Trump is highly likely to give a time interval between the tariff announcement and its implementation, Korea should make multilateral negotiating efforts by coming up with diverse action plans,” he said. “Hyundai Motor Group, for its part, also needs to step up its lobbying acts.”
Trump's tariff-related announcements have been closely monitored by policymakers in Seoul, amid concerns that Korea could become a target of his administration. Last year, Korea's trade surplus with the U.S. reached $55.7 billion.
In response to the tariff threats, the trade ministry said Thursday that the government has been communicating with the U.S. on the threatened tariffs as part of efforts to reduce uncertainties for domestic industries.
Currently, Deputy Trade Minister Park Jong-won is visiting Washington to meet with U.S. government officials and discuss Trump's trade policies and their effects on Korean industries.