South Korea announces emergency measures for car industry hit by US tariffs

South Korea on Wednesday announced emergency support measures for its auto sector, seeking to reduce the blow of US President Donald Trump's tariffs on a sector that has seen years of sharply rising exports to the US.

The measures include financial support for carmakers and tax cuts and subsidies to boost domestic demand, while the government also vowed efforts to negotiate with the US and help expand markets.

Trump has announced a 25% tariff on imported cars and light trucks starting on Thursday. The tariff covers more than $460bn (R11.08-trillion) worth of imports of vehicles and car parts annually, according to a Reuters analysis.

Manufacturers are expected to bear some of the tariff costs in the first year, but will eventually alter production and possibly cease importing some low-volume models into the US market.

"Given the [lower] proportion of South Korean carmakers' local production in the US, our industry is comparably at a disadvantage," the government said.

The tariff was expected to cause "significant" damage to South Korean carmakers and car parts manufacturers, though it was difficult to come up with numerical estimatest, the government said.

To help prevent liquidity issues, the government will raise policy financing support for carmakers to 15-trillion won (R201.47bn) in 2025 from the 13- trillion won (R173.63bn) previously planned, according to the government.

It will lower taxes on car purchases to 3.5% from  5% until June 2025 and raise electric-vehicle subsidies to 30% to 80% of price discounts from 20% to 40% with the period extended by six months to the end of this year.

The government said it would also actively support carmakers' efforts to expand export markets in the "Global South", which refers to less developed countries in Africa, Latin America and Asia, where demand is growing.

Regarding US tariffs, the government said "we will do our best to ensure that the US does not treat South Korea in a disadvantageous way compared with other allies, through negotiations and by strengthening bilateral cooperation", without details.

In 2024, South Korea's exports of cars to the US stood at $34.7bn (R686.73bn), accounting for 49% of its total car exports.

Hyundai said last week  it plans to keep sticker prices on its model lineup steady for the next two months in an effort to ease customer concerns that the fallout from tariffs will impact dealer lots.

The programme runs until June 2, and comes after the South Korean group's $21bn (R415.48bn) investment in the US announced last month.

Hyundai Motor's co-CEO Jose Munoz said there were no plans to raise prices in the US, Hyundai's biggest revenue-generating market.

Analysts said Trump may have a preference to propose aggressive tariffs  to extract quick concessions in a negotiation, adding car tariffs will put upward pressure on input costs for vehicles in general.

Relative to the combustion engine vehicle supply chain, the electric vehicle supply chain would likely suffer a bigger impact due to a dependence on China for EV parts.