Carmakers anxious over delayed US tariff decision

By Nam Hyun-woo

Carmakers and auto parts makers here remain anxious over the delayed U.S. decision on whether to impose tariffs on imported cars as the Trump administration continues to use the tariff as leverage in other political and economic talks with other countries, according to industry officials Monday.

Since the 25 percent tariff is expected to deal a heavy blow to Korea's automobile exports to the U.S., domestic carmakers and the government made huge investments in the U.S. and amended the free trade agreement, but uncertainties remain the same, as the decision is yet to come after 18 months of threats, the officials said.

“Companies usually come up with the following year's plan before the end of the year, but they are having difficulties planning 2020, because such a big decision will require a full-scale change of the output plan,” an official at a domestic carmaker said asking not to be named.

“It is said that Korean cars are likely to get a waiver from the tariff, but companies have to prepare for the worst, and keeping such a stringent status for more than a year is very exhausting.”

According to the government and foreign news reports, Thursday was the deadline for which Trump said he would decide whether to impose up to 25 percent tariff on imported vehicles and their parts including those made in Korea.

After saying he would “make a decision soon” a day before the deadline, however, Trump is yet to make a decision on the tariff, with foreign news reports alleging that he is expected to delay the decision for six months.

Trump first threatened the tariff in May last year, citing the Section 232 of the U.S. Trade Expansion Act. After studying the U.S. Commerce Department report in February, Trump in May delayed the decision by six months, which made Thursday the deadline.

If the U.S. imposes a 25 percent tariff on Korean cars, the country's 800,000-vehicle exports to America is expected to decline by 22.7 percent, according to a Korea International Trade Association report.

Hyundai Motor and Kia Motors each exported 310,000 and 230,000 vehicles to the U.S. last year, and industry officials say the numbers may halve in the worst case scenario.

GM Korea and Renault Samsung are also seriously concerned. GM Korea exported 369,000 cars last year and shipped 160,000 of them to the U.S., accounting for nearly 45 percent of the total. Renault Samsung shipped 110,000 Nissan Rogues to the U.S., which account for 78 percent of the company's total outbound shipments.

To avoid damages to the domestic automobile industry, Korea has been trying to exempt Korea from the tariff since last year.

In September last year, the two countries amended their free trade agreement and delayed the planned tariff elimination on Korean pickup trucks from 2021 to 2041.

Also, Hyundai Motor Group poured $2 billion into setting up a joint venture for self-driving cars in the U.S., as well as deciding to build the Santa Cruz pickup truck in the U.S. in 2021.

“Following those moves, there seems to be a slim chance that Korean cars will be slapped with the tariff,” said Kim Yong-jin, a Sogang University professor and chairman of the Korean Academy of Motor Industry. “As the decision continues to be postponed, however, it remains a pressure for companies, while Trump is keeping the tariff as leverage for other negotiations.”