US Imposes 25% Tariff on Foreign Auto Parts; Impact on Korean Parts Industry Expected

US President Donald Trump has officially imposed a 25% tariff on foreign auto parts.

As specified in the proclamation announced by President Trump last March, a 25% tariff on imported auto parts began to be imposed at 12:01 AM Eastern Time on the 3rd (1:01 PM Korean Time on the 3rd). The 25% tariff on foreign cars has been in effect since 12:01 AM on the 3rd of last month.

However, to reduce the burden on automakers with complete car production facilities in the US, President Trump announced a measure to partially ease tariffs on auto parts for two years through a revised proclamation on the 29th of last month.

From April 3 this year to April 30 next year, tariffs will be exempted for parts corresponding to 15% of the price of cars assembled in the US for one year, and from May 1 next year to April 30, 2027, tariffs will be exempted for parts corresponding to 10%.

President Trump signed a separate executive order stating that tariffs on cars and parts, tariffs on Canada and Mexico, aluminum tariffs, and steel tariffs do not overlap, and if a specific product falls under more than one tariff, the car and parts tariff will be applied first.

As tariffs on auto parts have been somewhat eased from the original plan, Korean parts companies have gained some breathing room, but due to the high proportion of exports to the US, the impact is expected to be inevitable.

According to the Korea International Trade Association, the proportion of Korean auto parts exports to the US increased from 29.5% in 2020 to 36.5% last year. The proportion of Korean-made parts in US auto parts imports was 6.4% last year, amounting to $13.5 billion (about 19 trillion won).

In detail, electrification parts such as batteries and motors ($3 billion), chassis and drive shaft parts ($3 billion), automotive electronic and electrical parts ($2.5 billion), body and parts ($2.3 billion), engine and parts ($1.3 billion), and automotive tires and tubes ($800 million) are included.

Reporter Lee Song-ryeol, Hankyung.com yisr0203@hankyung.com