Why GM sticks with Korea production despite looming 25% tariff

Korea Herald

08-05-2025

Automaker bets on trade talks, cost efficiency over relocation to US
General Motors, one of the top three automakers in the US, remains committed to leveraging South Korea as a vital production hub for its budget cars, despite the looming 25 percent tariff imposed by President Donald Trump.
According to a GM official cited by Bloomberg on Wednesday, the automaker reaffirmed its commitment to Korean operations, the production base for its cheaper models, including the Chevrolet Trailblazer sport utility vehicle, the Buick Encore GX SUV and the Buick Envista crossover.
This comes after GM Chief Financial Officer Paul Jacobson told reporters last week that the company plans to reduce costs to offset 30 percent of the tariff impact, rather than raising vehicle prices or relocating overseas operations to the US. In its annual earnings guidance released on May 1, GM revised its projected earnings before interest and taxes from a range of $13.7 billion–$15.7 billion to $10 billion–$12.5 billion, indicating approximately $4 billion–$5 billion in anticipated tariff-related burdens on imported automobiles and parts.
Despite the unfavorable optics of maintaining Korean production under the new tariffs, industry insiders here say GM is betting that upcoming Seoul–Washington trade negotiations will be pivotal for its global manufacturing strategy.
'I've heard that GM's Detroit headquarters is closely monitoring the bilateral trade discussions while actively lobbying the Trump administration,' said an industry source familiar with the matter, speaking on condition of anonymity. 'The key issue will be whether the Korean government can reduce the auto tariff rate to a level that allows GM to remain operational in Korea.'
Next week, US trade representative Jamieson Greer is scheduled to visit Korea to attend the APEC Trade Ministers' Meeting, where he will meet with Korean officials to review the "reciprocal tariffs" set to take effect in July. This will mark the first high-level US trade visit since the beginning of Trump's second term.
Lee Ho-geun, a car engineering professor at Daeduk University, echoed this view, noting, 'GM has long relied on its Korean unit's cost-effective production to build cars priced around $20,000. It's extremely difficult to manufacture these economical models in the US, which has a more expensive supply chain, partly due to constant wage hike demands from the United Auto Workers.'
However, Lee warned that if trade talks fail and the 25 percent tariffs on cars and parts remain in place until 2027 — when GM's agreement with the Korean government to maintain plant operations expires — the automaker may seriously consider withdrawing from Korea. 'With the tariffs, the price of budget models like the Trailblazer could increase by more than $5,000, negating any cost advantage from Korean production. If the tariff burden outweighs the benefits, GM could relocate production to North America,' he said.
Meanwhile, Yoon Myong-ok, chief marketing officer at GM Korea, said during a media conference on April 16 that the Bupyeong plant in Incheon received an additional order of 21,000 units from US headquarters. The facility's projected production volume is expected to rise from 208,000 to approximately 230,000 units.
GM operates three manufacturing plants in Bupyeong and Changwon, South Gyeongsang Province. In 2024, 84.8 percent of its production was exported to the US.