The Donald Trump administration announced on the 15th that it will apply a 15% tariff on Japanese automobiles imported into the U.S. starting from the 16th, under a trade agreement with Japan. Japanese cars exported to the U.S. had previously faced a total tariff of 27.5%, comprising a base tariff of 2.5% and sector-specific tariffs of 25% imposed by President Trump since April on automobiles and auto parts. This reduction lowers the tariff by 12.5 percentage points. Meanwhile, South Korean automobiles, amid stalled trade negotiations between Seoul and Washington, still face a 25% tariff, which is expected to significantly impact domestic companies like Hyundai Motor in the U.S. market.
According to the Federal Register published that day, the U.S. government stated that the tariff on Japanese automobiles would be reduced to 15% and take effect from the 16th. With Japan’s export tariffs to the U.S. significantly lowered, Japanese automakers are now gaining price competitiveness in the American market. Conversely, South Korean companies such as Hyundai and Kia, which directly compete with Japanese brands like Toyota, are expected to face substantial challenges. Since April, the U.S. has been applying 25% sector-specific tariffs on South Korean automobiles and auto parts under Section 232 of the Trade Expansion Act, which allows the president to impose tariffs if deemed a threat to “national security.”
Unlike Japan, South Korea and the U.S. reached a broad trade agreement on July 30 but have yet to finalize details due to disagreements for over a month and a half. Disputes persist over the structure and nature of the $350 billion (approximately 485.275 trillion Korean won) investment South Korea pledged to the U.S. Kim Jung-kwan, Minister of Trade, Industry and Energy, recently met with his counterpart, Commerce Secretary Howard Lutnick, in New York, but returned without significant progress. Automobiles are South Korea’s top export to the U.S., accounting for 10.4% of total exports. Following the trade agreement on July 30, Minister Kim stated, “We avoided the worst-case scenario,” and Chung Eui-sun, Chairman of Hyundai Motor, reportedly expressed gratitude.
Beyond automobiles, semiconductors, another key South Korean export, are also in crisis. Last month, Trump announced plans to impose approximately 100% tariffs on integrated circuits (ICs) and semiconductors. While specific rates remain undecided, the U.S. is expected to soon apply sector-specific tariffs to semiconductors and pharmaceuticals. After the July 30 agreement, the South Korean government claimed it secured a promise for most-favored-nation (MFN) treatment, ensuring it would not be disadvantaged compared to other countries if semiconductor tariffs were imposed. However, aside from a single post by Lutnick on X (formerly Twitter), the U.S. has not provided binding commitments, leaving the outcome uncertain. Some U.S. lawmakers have suggested exempting tariffs on semiconductor imports equivalent to domestic production volumes, but the uncertainty surrounding semiconductor tariffs remains a critical issue.
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