Hyundai and Kia are now facing major setbacks in the US auto market due to rising import duties. The new trade deal imposes a 15 percent tariff on Korean-made vehicles. This change ends the zero-tariff benefit they once enjoyed under the FTA.
Although the tariff is lower than the previous 25 percent rate, it still reduces Korea’s previous advantage over competitors. Earlier, Japan and the EU faced a 2.5 percent tariff but later secured 15 percent deals. In contrast, Hyundai and Kia had exported vehicles to the US without paying any duties.
Trade officials from both countries finalized the 15 percent figure during intense negotiations. Korea had pushed for a lower 12.5 percent rate. However, US officials insisted on matching Japan and the EU to maintain political balance.
Industry experts now say the auto tariffs impact Hyundai and Kia more than initially expected. The two automakers must absorb higher costs while competing with rivals who once had less favorable terms. Losing the zero-tariff edge forces Korean brands to change their pricing and logistics.
According to NH Investment & Securities, Hyundai will pay up to 2.7 trillion won in new annual tariffs. Kia could face an additional 2.3 trillion won under the new agreement. Despite recent sales growth, these added costs have already hurt profits.
During the second quarter, both firms experienced profit drops despite rising revenues. Combined, they lost 1.6 trillion won due to the tariff increase. As a result, Hyundai and Kia are fast-tracking new strategies to offset the damage.
Chair Chung Euisun announced a $21 billion investment to grow US-based production capacity. This move will help the company reach an annual output of 1.2 million vehicles in the US. Kia plans to redirect 25,000 units from Georgia to support this shift.
To adapt, Hyundai will adjust prices and improve cost control. Additionally, both firms will increase local sourcing of parts. They also plan to strengthen brand value and push for better product quality.
The auto tariffs impact long-term growth strategies, but Hyundai and Kia remain committed to the US market. By increasing production and reshaping operations, both companies aim to stay competitive. This marks a major pivot from relying on trade deals to investing directly in local infrastructure.
