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Korea Will Suffer More than Japan If U.S. Levies High Tariff on Import Cars
The Biggest Victim
Korea Will Suffer More than Japan If U.S. Levies High Tariff on Import Cars
  • By Jung Suk-yee
  • October 1, 2018, 09:40
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South Korea is expected to suffer the biggest decrease rate in car exports to the U.S. if Washington slaps a high tariff on imported cars pursuant to Article 232 of the Trade Expansion Act.

If the U.S. slaps a 25 percent tariff on imported cars pursuant to Article 232 of the Trade Expansion Act, Korea will suffer the highest decrease rate in car exports to the U.S. among auto exporters in the world, an industry report says.

The report from the International Trade Research Institute of the Korea International Trade Association (KITA) estimates that Korea's car exports to the U.S. will fall by 22.7%, the sharpest among auto exporters to U.S., followed by Japan (21.5%), China (21.3%) and Germany (21%).


The report says that Japan will suffer the largest reduction in terms of the number of cars with 420,000 units per year, followed by 160,000 units for Korea, and 150,000 units for Germany. Last year, the U.S. imported 1,960,000 units from Japan, 720,000 from Korea, 710,000 from Germany, and 40,000 from China.

A 25 percent tariff hike is expected to increase the consumer prices of Korean cars by 23.9% on average, the highest among imported cars, meaning that Korean cars will be most affected by the U.S. tariff imposition. The comparable figures for other countries were 23.7% for Mexico, 23.5% for Canada, 23.3% for Japan, 23.1% for China and 22.9% for Germany. This is because compared to retail prices, production costs of cars manufactured in Korea and sold in the United States are relatively higher than those of major countries.

Korea’s exports of finished cars and parts to the U.S. reached US$24 billion in 2017, accounting for 33.7% of Korea’s entire exports to the U.S. and 1.6% of the nation’s gross domestic product (GDP). Therefore, the research institute says that there is concern that the US’s high import duty imposition on import cars will have considerable influence on Korea’s entire automobile industry.

Among countries that export cars to the U.S., Japan has the highest reliance on the U.S. market with 41.3%, followed by Mexico (35.8%), Korea (33.7%), Germany (26.7%) and Canada (20.7%).

In addition, the U.S.’s imposition of high tariffs on import automobiles is having a negative impact on U.S. auto consumption and exports. Consumer prices of cars produced and sold in the U.S. are expected to rise by US$3,025 (11.1%) from US$27,321 to US$30,346 due to a 25% import duty on auto parts. As for import cars in the U.S., their average consumer price is expected to rise by US$6,231 or 23.4% to US$32,282 from US$26,651.