Home > Business > Economy

U.S. lowers tariffs on Japanese cars, raising concerns for Korea

Published: 16 Sep. 2025, 18:33 Updated: 16 Sep. 2025, 19:07

Cars ready for export are parked at a port in Pyeongtaek, Gyeonggi on Sept. 16. [YONHAP]

The United States on Tuesday lowered tariffs on Japanese automobiles and auto parts to 15 percent, creating a 10 percentage point gap with the 25 percent rate still applied to Korean exports — a move that threatens to undercut Korea’s longstanding price competitiveness in the U.S. market.

Hyundai Motor Group is expected to seek a breakthrough as it unveils its U.S. and broader market strategies during the upcoming CEO Investor Day, scheduled for Thursday in New York — the first time the annual event is being hosted outside Korea since it launched in 2019.

The tariff adjustment, announced by the U.S. Department of Commerce via the Federal Register, applies to Japanese passenger vehicles, light trucks and auto components as of Tuesday.

Japan had been subject to a combined tariff of 27.5 percent since April — a 2.5 percent base duty plus the 25 percent additional levy imposed earlier this year — but secured the reduction in bilateral talks that were finalized on July 22.

The 2025 hybrid version of the Elantra [HYUNDAI MOTOR]

Korea, which has exported cars to the United States duty-free since the Korea-U.S. Free Trade Agreement took effect in 2012, now finds itself at a comparative disadvantage. While Korea agreed in principle on July 30 to lower the tariff to 15 percent in a separate trade deal with the United States, follow-up negotiations have stalled, delaying its implementation.

The delay has left Korean automakers paying a 25 percent duty while their Japanese competitors benefit from the lower rate — a gap of 10 percentage points that could squeeze margins or force price hikes in the competitive U.S. market.

For example, Hyundai’s Sonata Hybrid, which is entirely manufactured in Korea, has a U.S. starting price of $29,050, comparable to Toyota’s Camry Hybrid, priced at $29,000 and produced in Kentucky. The tariff difference could force Hyundai to absorb the cost or pass it on to consumers, eroding its competitive edge.

Industry analysts warn the tariff gap may persist through the end of the year.

“It took Japan and the U.K. more than 50 days to implement their tariff agreements with the U.S.,” said Lee Hyun-wook, a research associate at IBK Investment & Securities. “Given that the United States is pressuring Korea over its $350 billion investment fund for U.S. projects, it's unlikely we’ll see tariff relief before year’s end — even if a deal is signed later this month.”

Lee estimates Hyundai and Kia are shouldering monthly tariff burdens of 400 billion won ($289.7 million) and 300 billion won respectively under the current rate.

Kim Kyoung-you, a researcher at the Korea Institute for Industrial Economics and Trade, added that the two automakers suffered a combined loss of 1.6 trillion won in the second quarter due to tariffs, and further price pressure is expected in the second half.

A Toyota Camry Hybrid model sold in the United States [TOYOTA]

Hyundai Motor Group is set to address its U.S. strategy at the 2025 CEO Investor Day. Hyundai has already pledged $26 billion in investments in the United States over the past four years and is expected to unveil further plans, including its approach to tariffs, the status of its robotics business in the U.S. and its hybrid vehicle road map for the U.S. market.

The group is also facing growing scrutiny over production delays following the recent detention of Korean workers in Georgia, where Hyundai operates a major manufacturing hub.

In a letter to employees on Monday, Hyundai Motor President José Muñoz reaffirmed the company’s commitment to the U.S. market, saying that its 15-year-and-counting business in Georgia remains unwavering and that collaboration between global operations is essential.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY LEE SU-JEONG [[email protected]]