The South Korean auto industry is keeping a close watch on the Commerce Department of the U.S. that has just 10 days to submit its findings of an investigation that will determine whether the country would slap tariffs as high as 25 percent on automobile and parts imports.
The U.S. Commerce Department initiated the investigation on May 23 last year under Section 232 of the Trade Expansion Act that gives the U.S. President Donald Trump an authority to limit imports if they are found to damage the U.S. auto industry and therefore threaten national security.
The Commerce Secretary must submit a report to President Trump no later than Feb. 17, 270 days from the launch of its investigation, and the president will then have 90 days to accept or reject the findings.
Should the hefty tariffs be imposed, damage to the Korean auto industry would reach 3 trillion won ($2.67 billion), according to industry experts. The U.S. market accounted for 33 percent of the total auto exports of Korea last year. Hana Institute of Finance found that the levy of up to 25 percent is estimated to cause total 2.9 trillion won in damage for the entire Korean auto industry, 1.35 trillion won for finished car makers and 1.54 trillion won for auto parts manufacturers.
To avoid the hefty duties, the Korean government and auto industry representatives have met with U.S. officials to propose possible exemption of additional tariffs on imports of Korean cars and auto parts, citing the country’s revised free trade agreement with the U.S. and investment made by Korea’s auto giant Hyundai Motor and its smaller sibling Kia Motors in the U.S.
The country’s Trade Minister Kim Hyun-jong visited again the U.S. from Jan.29 to Feb.6 to meet the National Economic Council Director Larry Kudlow, Trade Representative Robert Lighthizer and Commerce Secretary Wilbur Ross to ask them to save Korean imports from sweeping tariffs on foreign-made cars. Kim is reported to have stressed that Korea has already made concessions in the auto sector in the recent revision of the free trade agreement (FTA) with the U.S., and the heavy tariffs would hurt the alliance of the U.S. and Korea.
Under the revised pact, the 25-percent U.S. tariffs on Korean pickup trucks have been extended another 20 years to 2041. Korea also agreed to double its import cap of U.S. cars that do not have to comply with domestic regulations.
Hyundai Motor Executive Vice Chairman Chung Eui-sun, also heir apparent of Korea’s second largest conglomerate Hyundai Motor Group, in September flew to the U.S. to have a tete-a-tete meeting with Mr. Ross in Washington to save Korean imports from sweeping U.S. tariffs on foreign-made cars.
During the meeting, Chung was expected to stress contribution of Hyundai Motor and Kia Motors to economic growth and job creation in two southern states Alabama and Georgia in which the two Korean auto makers run local factories.
Before the meeting, Hyundai Motor pledged to invest a combined $3.1 billion in the U.S. until 2021. Earlier last year, it already vowed another $380 million to add an engine head manufacturing facility at its Alabama factory. It has so far invested about $8.3 billion in the U.S.
By Lim Sung-hyun and Choi Mira
[ⓒ Pulse by Maeil Business Newspaper & mk.co.kr, All rights reserved]