Seoul (Reuters) -Shares of South Korean automakers Hyundai Motor and Kia Corp fell on Thursday after U.S. President Donald Trump said the U.S. will charge a 15% tariff on imports from South Korea, including autos, as part of a trade deal.
While the agreement reduces auto tariffs from 25%, it removes the 2.5 percentage point advantage in tariffs that South Korean automakers had enjoyed over Japanese rivals under the Korea-U.S. free trade deal.
Some analysts said the share falls may have been driven by profit-taking as news of the tariffs was already factored in after South Korean automaker shares surged last week following news that Trump agreed to reduce Japanese auto imports to 15%, a move that stoked optimism about a similar deal for Seoul.
South Korea’s auto association said the tariff cuts are “fortunate” and said it removes uncertainty and creates a level playing ground with Japanese and European rivals.
Hyundai Motor said the deal “validates our unwavering confidence in the U.S. market and our commitment to American manufacturing.”
Hyundai Motor Group in March announced a $21 billion investment in the United States with Trump at the White House, including a $5.8 billion steel factory and an expansion of Hyundai Motor’s new car factory in Georgia.
Before Washington imposed 25% auto tariffs in April, there were zero tariffs on most South Korean auto imports under a bilateral trade deal, while there was a 2.5% tariff on Japanese auto imports.
South Korean negotiators demanded 12.5% auto tariffs, but Trump wanted the rate to be 15%, the presidential office said.
“The non-tariff premium for Korean automakers is gone,” said Shin Yoon-chul, an analyst at Kiwoom Securities.
But James Hong, head of mobility research at Macquarie, said the difference is “manageable,” given the brand value and more sales of higher-price vehicles for Korean automakers.
Korean automakers are also better positioned than U.S. automakers which have been paying up to 25% on vehicles imported from Mexico, said Ester Yim, an analyst at Samsung Securities.
Hyundai Motor shares ended down 4.5% and Kia Corp stock lost 7.3%.
(Reporting by Hyunjoo Jin in Seoul and Daniel Leussink in Tokyo and Heekyong Yang in Seoul; Editing by Anne Marie Roantree and Michael Perry)
