Former Trade Minister Kim Jong-hoon joined the Hyundai Motor Group as a special advisor on July 9. He is expected to coordinate the group’s efforts to deal with U.S. trade pressure with President Donald Trump poised to impose 25% tariffs on imported cars.
The former trade minister represented South Korea during the KORUS FTA negotiations in 2007 and the additional negotiations in 2008. The automobile sector was one of the hottest issues in both and, as such, he is the one who understands more than anyone else the significance of the automobile industry for both countries. “Trade in the industry is very closely related to South Korea’s national interests, and I’ll do my utmost to contribute to my country via Hyundai as well,” he said.
According to him, the imposition of the tariff is no easy matter for the U.S. as well, but South Korea needs to be well prepared in that the U.S. President is a person who defies expectations.
“The U.S. is unlikely to take risks by invoking Section 232 of the Trade Act of 1962 and facing South Korea, Japan and the EU with its trade war against China already going on,” he mentioned, adding, “In South Korea, in particular, the tariff on imported cars is already 0% based on the KORUS FTA and the non-tariff barriers have already been lowered to a large extent through the additional negotiations in 2010 and those for KORUS FTA revision in March this year.” He went on to say, “Both sides reached an agreement in March and the agreement is currently being examined in the U.S. Congress before final signing, which means the U.S. is rather unlikely to put the issue back on the table.”
He also stressed that such a high tariff will be of no help for the U.S. economy. “In the U.S. steel sector, tariff imposition resulted in higher prices in the end due to undersupply in the local market, and the same thing will happen in the automobile sector,” he continued to say, adding, “Given that the annual demand in the U.S. market is 18 million cars and its annual production capacity is 10 million, tariff imposition will have a negative impact on American consumers by increasing their burden and leaving fewer options to choose from.”
According to him, which company produces more in the U.S. is likely to hold the key if the U.S. President pushes ahead with his plan nonetheless. At present, the Hyundai Motor Group’s U.S. sales volume is divided into 50% exported from South Korea and the rest produced in the U.S. For the group, a response based on more production in the U.S. is a less viable option in view of time and cost requirements and opposition from unionized workers.
“The portfolios of Hyundai and Kia, which focus on non-large and non-expensive vehicles, are likely to be affected more by the tariffs in that those who buy such cars tend to be more sensitive to price increase than, for example, luxury sedan customers,” he explained, continuing, “With a public hearing on the issue around the corner in the U.S., I’ll provide advice to help Hyundai dissuade the Donald Trump administration.”