The Trump administration’s second term has brought renewed volatility to the tariff landscape facing Korea’s automotive industry. In late 2025, Korea secured a temporary reduction in tariffs on Korean-made vehicles from 25% to 15%, contingent on negotiations with the US and investment commitments. However, in January 2026, Trump suggested that tariffs could be reinstated to 25% due to delays in fulfilling commitments, once again raising uncertainty in the industry.
The fluctuating tariff regime has led automakers to view tariffs not as a one-off risk but as a structural condition requiring ongoing management. The financial performances of Hyundai and Kia in 2025 reflected the impact of tariffs, with operating profits declining under the 25% tariff regime. Despite a reduction to 15%, relief was limited due to inventory levels and timing of tariff application.
As the possibility of tariff escalation looms, discussions around expanding local US production have resurfaced. However, existing North American production bases, such as Hyundai Motor Manufacturing Alabama and Kia’s Georgia plant, are already operating at high utilization levels, leaving little room for immediate volume absorption.
Hyundai Motor Group Metaplant America, a new Electric Vehicle (EV) production base, has shown potential for expanding the group’s North American electrification strategy. However, it is still premature to rely on the facility as a stable supply base for replacing Korean production volumes.
Hyundai and Kia have prioritized price protection in the US market, absorbing tariff-related costs internally rather than passing them on to consumers. This approach highlights the structural impact of tariffs on profitability and the need for ongoing cost management strategies.
The ongoing tariff uncertainty is forcing reassessments of Korean production assets and supplier networks, leading to potential shifts in production strategies. Investments in localization, automation, and portfolio adjustments indicate a gradual realignment towards medium-term structural changes.
In the face of tariff instability, policy risk avoidance is becoming a crucial factor in production location and model allocation decisions. While Korean production will continue to play a role in global supply, the strategic priority assigned to Korean facilities may become more conservative in future decisions.
Overall, Hyundai and Kia’s production strategies are evolving in response to tariff volatility, with incremental shifts accumulating over time. While North American localization and portfolio rebalancing are underway, the unpredictable nature of tariffs is increasingly being internalized in production planning.
By Hoonho Bae, Manager, Korea Automotive Forecast, GlobalData
“Tariffs as a structural constraint: How US trade volatility is reshaping Hyundai and Kia’s production strategy” was originally published by Just Auto, a GlobalData owned brand.
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