In South Korea, the Trump administration’s 25% tariff on imported cars has sent local automakers Hyundai and Kia scrambling to protect one of the country’s most valuable exports. But General Motors may be facing a much larger predicament. Last year, GM shipped 418,782 units from its factories in South Korea to American consumers, accounting for 88.5% of its total sales. Unlike Hyundai and Kia, which dominate the domestic market, GM produces budget SUVs like the Chevrolet Trax and Chevrolet Trailblazer primarily for the U.S. market. The Trax has been South Korea’s most-exported car since 2023.
The Detroit-based automaker operates three factories in South Korea and employs around 11,000 workers in the country, making it uniquely vulnerable to Trump’s auto tariffs. Before the tariffs were imposed, cars traded between the U.S. and South Korea were not taxed under a bilateral free trade agreement. This agreement helped South Korea become the third-largest automobile exporter to the U.S. last year, totaling $34.7 billion in exports. In contrast, South Korea only imported $2.1 billion worth of cars from the U.S.
GM executives estimate that the tariffs could cost the company up to $5 billion this year. To offset the impact, GM plans to increase production in its U.S. plants. With additional factories in Mexico and Canada, GM currently imports about half of the cars it sells in the U.S. If the tariffs remain in place, GM may have no choice but to leave South Korea. Lee Ho-guen, an automotive engineering professor, expressed concerns that the tariffs could increase the sticker price on cars shipped to the U.S. by up to $10,000. GM sells less than 50,000 units a year in South Korea, leaving little room for adjustments in strategy.
Kim Woong-heon, an official in GM Korea’s labor union, remains cautious about rumors of the company’s potential exit. However, he emphasized concerns about GM’s long-term commitment to the country. The union is apprehensive due to GM’s history of shutting down a factory in 2018. GM first established itself in South Korea in 2002 by acquiring the bankrupt Daewoo Motor Co. Critics at the time accused GM of taking advantage of Daewoo’s situation. After facing bankruptcy in 2009 and subsequent global restructuring, GM received financial support from South Korea in exchange for a commitment to stay open for at least 10 more years.
In recent weeks, GM Korea executives have tried to dispel rumors about the company’s departure from South Korea. Gustavo Colossi, GM Korea’s vice president of sales, stated that the company plans to move forward with its sales strategies in Korea. The union demands measures to prove GM’s commitment beyond the expiry of the 10-year guarantee in 2027. This includes producing electric and plug-in hybrid vehicles in South Korean factories and diversifying its product range for sale in South Korea and other Asian markets.
The future of GM’s operations in South Korea hinges on ongoing tariff negotiations between the U.S. and South Korea. These talks aim to reach a deal by July 8. While South Korean trade minister Ahn Duk-geun highlights the importance of cars in the U.S.-South Korea trade relationship, it is uncertain whether Seoul can secure a favorable deal like the U.K., which recently obtained a 10% rate on the first 100,000 vehicles shipped to the U.S. annually. Considering South Korea’s significant trade surplus with the U.S., the outcome of the negotiations remains unclear. Lee, the automotive professor, predicts that GM may leave or significantly reduce its production in South Korea within the next two years. Local officials in Changwon, where GM operates a factory, are cautious about speculations but acknowledge the potential impact on the city’s economy.
Woo Choon-ae, a real estate agent in Changwon, expresses concerns about the potential closure of GM’s factory in the city. The factory employs 2,800 workers and supports numerous jobs at suppliers, making it a vital component of the local economy. If GM were to shut down its operations in Changwon, the city would suffer from a loss of jobs and a decline in the housing market. The uncertainty surrounding GM’s future in South Korea creates anxiety among residents and businesses reliant on the company’s presence in the region.
