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Korea Herald
08-05-2025
- Automotive
- Korea Herald
Why GM sticks with Korea production despite looming 25% tariff
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.
The Star
26-04-2025
- Business
- The Star
Seoul, Washington lay groundwork for tariff relief deal by July
SEOUL: South Korea and the US have agreed to work toward a 'July Package," a comprehensive package deal aimed at eliminating US tariffs on Korean exports before July 8, when the 90-day grace period on US "reciprocal tariffs" expires, according to Korea's top officials on Friday (April 25). The agreement came during a '2+2' trade meeting in Washington on Thursday, between South Korean Deputy Prime Minister and Finance Minister Choi Sang-mok, Industry Minister Ahn Duk-geun and their US counterparts, Treasury Secretary Scott Bessent and Trade Representative Jamieson Greer. The meeting was held at the US Department of the Treasury in Washington DC, lasting for a total of 1 hour and 8 minutes to conclude at 10.18am. At a press conference with Korean reporters following the bilateral meeting, Choi confirmed that both sides agreed to focus their discussions on four main areas: tariffs and non-tariff barriers, economic security, investment cooperation and exchange rate policy. 'The meeting helped narrow down the agenda and build consensus on a schedule, effectively establishing the framework for the negotiations,' Choi said. "We explained the various domestic considerations that could affect the negotiations and asked for the US' understanding, including the country's political schedule, trade-related laws and the need for coordination with the National Assembly." With Korea set to hold a presidential election on June 3 following the impeachment of former President Yoon Suk Yeol earlier this month, the government is expected to finalize the agreement package after the new administration takes office. The Korean ministers said they delivered their commitment to cooperation on key US interests, including trade investment, shipbuilding and energy. Ahn also said he requested the removal of reciprocal tariffs and item-specific tariffs on automobiles and steel in a separate meeting held with Greer. US President Donald Trump implemented a 25 percent tariff on steel and aluminum starting March 12. On April 3, a 25 percent tariff on foreign automobiles took effect, with tariffs on auto parts scheduled to begin on May 3. "Through this meeting, Korea and the US reached a basic agreement on the framework for future negotiations," Ahn said, noting that they agreed to form multiple working groups to facilitate future talks. Once working-level talks begin next week, the two sides will determine the scope of issues to be included in the July Package, Ahn added. Regarding Bessent's comment that "South Korea brought its A-game and we will be watching to see if it follows through," Ahn suggested that the remark likely reflected the consensus formed around Korea's proposal for cooperation in the shipbuilding sector. Before the ministers' press conference, Bessent had said the trade talks with Korea were "very successful." Additional high-level talks are scheduled with Greer, who will visit Korea for the APEC Trade Ministers' Meeting in Seoul May 15-16. On April 2, Trump also signed an executive order imposing a 10 percent base tariff on all trading partners, with an additional country-specific tariff ranging from 10 percent to 50 percent. The total reciprocal tariff of 25 percent was imposed on Korea, but has been granted a 90-day grace period. Meanwhile, the talks did not cover the issues of renegotiating defence cost-sharing, or the existing free trade agreement. With a boost in sentiment following the tariff negotiation, the Korean won opened slightly stronger against the US dollar on Friday. In the Seoul foreign exchange market, the won-dollar exchange rate started the day at 1,432.0 won per dollar, down 3.0 won from the previous session's close. The Kospi also opened slightly higher at 2,544, supported by foreign and institutional buying. Gains in shipbuilding stocks like HD Hyundai Heavy Industries and Hanwha Ocean, along with strong performances in petrochemical shares like Aekyung Chemical and Hanwha Solutions, helped lift the index. As of 2.30pm Friday, HHI was trading at 400,000 won ($278), up 6.38 percent from the previous day's close. Shares of HD Korea Shipbuilding & Offshore Engineering were at 264,500 won, up 6.01 percent, while Hanwha Ocean was trading at 89,000 won, marking a 10 percent gain. Aekyung Chemical's shares also soared, jumping 29.99 percent to 10,350 won. - The Korea Herald/ANN
