Following the start of the Trump administration’s second term, the tariff landscape facing Korea’s auto industry has once again entered a period of increased volatility. Towards the end of 2025, Korea secured a temporary reduction in tariffs on Korean-made vehicles from 25% to 15%, contingent on bilateral negotiations with the United States and meeting investment commitments, offering the industry a measure of relief. However, in January 2026, Trump stated that tariffs could be reset to 25% due to delays in implementing agreed commitments, bringing tariff uncertainty back to the forefront.
The key issue at this stage is not the possibility of a tariff increase itself, but the precedent that tariff regimes can swing rapidly between easing and tightening again. Even where an exemption exists, the perception that its durability may be undermined by impeachment has begun to affect how automakers design their medium-term production strategies. Tariffs are increasingly seen not as a one-time risk, but as a structural condition that must be managed on an ongoing basis.
This change in perception is reinforced by the recent financial results of Hyundai and Kia. In 2025, Hyundai recorded annual revenue of approximately $143 billion, having achieved the highest sales total in its history, while Kia also posted a record of around $88 billion. Despite this revenue growth, the cost burden from US tariffs was clearly reflected in profits. Under the 25% tariff regime applied during 2025, Hyundai’s operating profit decreased by $2.9 billion, while Kia incurred tariff-related costs of $2.2 billion. Although the rate was reduced to 15% starting in November 2025, effective relief was limited through the end of the year due to distributor inventory levels and the timing of the tariffs. This highlights the difficulty of resolving tariff-related risks in the short term.
As the possibility of a new tariff escalation has resurfaced, the expansion of US domestic production has once again come into discussion. However, this should be interpreted less as an indication of an immediate shift in large-scale production and more as a sign that the relative attractiveness of strategic options is changing.
Hyundai and Kia’s major production bases in North America are already operating at high utilization levels. Hyundai Motor Manufacturing Alabama (HMMA), with an annual capacity of 360,000 units, produced 333,000 vehicles between January and November 2025, representing a utilization rate of more than 90%. Meanwhile, Kia’s plant in Georgia, with an estimated annual capacity of around 340,000 units, recorded a utilization rate of approximately 101% in the third quarter of 2025. These figures indicate that existing internal combustion engine (ICE) production sites in North America have entered a high utilization phase, leaving limited room to absorb additional volumes in the near term.