US Automakers Face Headwinds as South Korean Auto Tariffs Slashed
A tariff reduction to 15% for rivals like Hyundai and Kia adds significant competitive pressure on Detroit's legacy manufacturers.
Shares of Ford and General Motors edged lower as the U.S. government confirmed a significant tariff reduction on auto imports from South Korea, intensifying the competitive landscape for America’s largest carmakers.
The tariff rate for South Korean vehicles will fall to 15% from a previous 25%, a 10-point drop that materially lowers the cost for brands like Hyundai and Kia to sell in the profitable U.S. market. The move, confirmed in a statement from the Commerce Department, is a response to legislation passed in South Korea designed to fulfill strategic investment commitments in the United States.
This policy shift presents a fresh challenge for Detroit at a time when South Korean automakers are already posting impressive gains. During the first half of 2025, both Hyundai and Kia reported record-breaking U.S. sales figures, capturing market share with a popular lineup of gasoline, hybrid, and electric vehicles. The tariff reduction is expected to bolster their pricing power and competitive footing even further.
In recent trading, shares of Ford Motor Company (F) were down approximately 0.9%, while General Motors (GM) saw its stock decline by about 0.8%. While the movements are modest, they reflect investor concern over tightening margins and a more challenging domestic market.
The advantage for South Korean imports comes as U.S. automakers navigate their own set of tariff-related burdens. Both Ford and GM have recently disclosed that they anticipate billions in costs related to other import duties. General Motors has projected a gross tariff impact of $4 billion to $5 billion for the year, according to its latest earnings presentation.
This divergence—cost relief for foreign rivals and cost pressures for domestic incumbents—could squeeze profitability, particularly in the hyper-competitive market for mass-market sedans and SUVs. It also complicates the expensive transition to electric vehicles, where U.S. manufacturers are already facing steep losses. Ford has projected its EV unit, Model e, could lose between $5 billion and $5.5 billion this year.
The tariff reduction is part of a broader trade agreement that was finalized during a summit between U.S. and South Korean leaders. The deal includes a South Korean pledge for $350 billion in phased investments into the United States, creating a diplomatic win for the administration but a potential headache for Detroit’s boardrooms. Analysts will be closely watching whether the increased competition forces U.S. automakers to adjust pricing or sacrifice margins to defend their home turf.