US’ 25% Tariff May Put Kia’ Gwangju Plant on Verge of Shutdown

Kia Motors’ manufacturing plant located in Gwangju may have to be shut down if the United States imposes a tariff of up to 25% on imported cars in the second half of this year.

Last year, the plant produced a total of 492,233 vehicles, including 183,959 units exported to the United States. Those are divided into 109,625 Souls and 74,334 Sportages. During the period, 70% of the Souls produced there were shipped to the United States.

The tariff is likely to have a significant impact on the regional economy of Gwangju as well. As of the end of 2016, the Kia plant accounted for 10% of the manufacturing workers in the city, 32% of the city’s total industrial output, and 40% of the city’s total exports. At present, hundreds of companies are supplying their parts to the plant.
 

Such potential losses, in fact, are not limited to the plant of Kia Motors. According to the Korea Automobile Manufacturers Association, South Korea exported 2,530,194 cars last year and the U.S. was the destination for one-third of the total.

The ongoing trade war between the U.S. and China, in the meantime, is predicted to negatively affect South Korea’s exports. The U.S. is going to impose tariffs worth US$34 billion on July 6 on 818 Chinese products such as machinery, automobiles and electronic devices before increasing the tariffs by US$16 billion to cover 284 additional items such as petrochemical products and memory semiconductor chips. China is planning to impose the same amount of tariffs on U.S. agricultural products, automobiles, chemical and energy products, etc. According to the Korea Institute for Industrial Economics and Trade, the tariffs are estimated to result in a decline in auto parts exports from South Korea of approximately US$20 million.