South Korea has announced a sweeping emergency package to support its auto industry in response to U.S. President Donald Trump’s 25% tariff on imported cars and light trucks, set to begin Thursday. The tariff affects over $460 billion in annual imports and is expected to significantly impact South Korean automakers, who rely heavily on exports to the U.S.—$34.7 billion in 2024 alone, or 49% of their total.
To mitigate the fallout, the South Korean government will increase policy financing for automakers to 15 trillion won ($10.18 billion) in 2025, up from 13 trillion won. It will also reduce automobile purchase taxes from 5% to 3.5% until June 2025 and expand electric vehicle (EV) subsidies to 30%-80% of sticker prices, extended through year-end.
Officials acknowledged the nation’s limited local production in the U.S. puts it at a disadvantage compared to other countries, warning of "significant" damage to auto and parts manufacturers. However, specific financial estimates remain uncertain.
South Korea pledged to negotiate with the U.S. to prevent unequal treatment and will boost efforts to expand auto exports to the Global South, including Latin America, Africa, and Asia.
Hyundai Motor, whose U.S. market is its largest revenue source, recently committed to keeping prices steady for two months and reiterated it has no plans to increase prices despite the tariff. This comes after the company’s $21 billion U.S. investment announced in March.
Analysts suggest Trump may use the aggressive tariff approach to prompt faster negotiations. While all vehicle supply chains will be affected, the EV sector may face greater challenges due to its reliance on Chinese parts.