Seoul, Feb 20: South Korean automotive and chip companies are devising strategies to deal with looming hefty tariffs on their US exports, industry observers said on Wednesday, after US President Donald Trump announced his intention to impose auto duties of around 25 per cent and similar levels on chips.Trump revealed his intention to impose such duties on auto imports as early as April 2 and introduce similar or higher sectoral tariffs on semiconductors and pharmaceuticals, without providing specific dates for those sectors.
According to industry observers, Hyundai Motor Group has been preparing for such tariffs since Trump’s re-election by accelerating efforts to increase its production capacity in the US, reports Yonhap news agency.
The South Korean automotive giant aims to boost the production capacity of its Hyundai Motor Group Metaplant America (HMGMA) in Georgia from 300,000 to 500,000 units per year.
Additionally, it plans to leverage output from its separate Alabama and Georgia plants, currently at 356,100 units and 340,000 units per year, respectively, to elevate the group’s total U.S. production capacity.
The move is designed to mitigate tariff-related costs by increasing the proportion of vehicles sold directly from U.S. plants. However, as expanding local production would lead to additional expenses, the industry is carefully deliberating specific expansion strategies.
Of some 1.7 million vehicles Hyundai Motor and Kia sold in the US last year, approximately 60 per cent were manufactured in South Korea.
Kim Seung-jun, chief financial officer at Kia, said during an earnings conference call last month that with potential tariffs creating short-term financial burdens, the company is exploring price adjustments and shifts in the location of production as long-term solutions.
GM Korea, the South Korean unit of General Motors (GM) of the US, ships approximately 84 per cent of its production to the American market.
The company is thus also closely monitoring tariff-related policy changes. Industry observers suggest that the GM headquarters could reallocate GM Korea’s production volume to its U.S. factories.
South Korean auto parts suppliers are also evaluating the feasibility of expanding their US production.
Chipmakers, such as Samsung Electronics Co. and SK hynix Inc., are also bracing for fallout from Trump’s tariff warning on semiconductors.
Semiconductors ranked as South Korea’s third-largest exported good to the U.S. last year, with shipments totalling US$10.6 billion, according to the Korea International Trade Association.
“With South Korean semiconductors accounting for about 7 per cent of total U.S. chip imports, a minimum 25 per cent tariff would inevitably impact the industry,” an industry source said, asking not to be identified.