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Trump gov’t mulling tariffs on car imports

May 25,2018
The Trump administration is threatening new tariffs again, this time on vehicle imports.

The U.S. government has launched a national security investigation into imported vehicles which could potentially lead to new tariffs similar to the ones imposed in March on steel and aluminum imported from some countries. Korea was exempted from the stiff tariffs on steel in a settlement in April that involved changes to its import regulations for American cars.

Sources say Trump is seeking new tariffs of 20 to 25 percent on automobile imports. Korean-made autos are currently exempt from U.S. duties under the bilateral trade pact that went into effect in 2012. Korean carmakers, already suffering from sluggish sales in China and the United States, fear falling victim to the new measure.

A probe under Section 232 of the Trade Expansion Act of 1962 would look into whether vehicle and auto part imports threaten the U.S. industry’s health and ability to research and develop new, advanced technologies, and therefore U.S. national security, the U.S. Commerce Department said on Wednesday.

“There is evidence suggesting that, for decades, imports from abroad have eroded our domestic auto industry,” Commerce Secretary Wilbur Ross said in a statement.

Section 232 allows the president to impose restrictions on imports for reasons of national security, and his administration cited the provision when imposing the 25 percent tariffs on steel imports and 10 percent tariffs on aluminum in March.

The renewed tariff threat from Trump comes as his government’s negotiations with Canada and Mexico over revamping the continent-wide North American Free Trade Agreement (Nafta) have stalled over auto issues.

Korea would inevitably be hit hard by new tariffs. The United States is the biggest importer of made-in-Korea cars. Of 2.53 million cars Korea exported last year, 33 percent were shipped to the United States, down from 37 percent in 2016 and 36 percent in 2015.

For the United States, Korea was the fifth-largest automobile exporter in the world last year after Canada, Japan, Mexico and Germany. Korea’s share of all vehicle imports was 8.9 percent. The U.S. trade deficit with Korea in automobiles was $14.2 billion last year.

Hyundai, the top player among five carmakers in Korea, would be dealt the most severe blow. Its share in Korea’s vehicle exports last year in terms of units was 36.3 percent, followed by second player Kia Motors with 33.6 percent.

GM Korea, now the smallest carmaker, accounted for 15.5 percent and Renault Samsung, the fourth-largest, 14.6 percent. The third largest player Ssangyong Motor does not export to the United States.

“It will become almost impossible to export to the United States should 25 percent tariffs materialize,” said a spokesman for one of the carmakers.

Another auto industry insider said Korean carmakers will inevitably have to raise the proportion of vehicles they manufacture in the United States to maintain price competitiveness.

BY SEO JI-EUN [seo.jieun@joongang.co.kr]