The landscape of international trade has shifted once again in the automotive and technology sectors. Donald Trump’s administration announced on September 15, 2025, that starting September 16, a 15% tariff will be applied to imported Japanese cars in the United States, significantly easing the previously imposed burden. This measure, resulting from an agreement with Tokyo, puts South Korean manufacturers Hyundai and Kia in a difficult position, as they will continue facing a 25% tariff due to stalled trade negotiations between Washington and Seoul.
The news represents a 12.5 percentage point cut from the total 27.5% tariff levied on Japanese vehicles since April, when Trump imposed a 25% sector-specific tariff on cars and parts, in addition to a general 2.5%. Meanwhile, South Korean manufacturers maintain the full 25% tariff, which could disrupt competitive balance in the world’s largest automobile market.
The Blow to South Korea: Hyundai and Kia in the Crosshairs
The U.S. Federal Register confirmed the measure would take effect immediately, starting September 16. For Tokyo, it’s a trade victory that bolsters the position of Toyota, Honda, Nissan, and Mazda in the U.S. market. For Seoul, however, it’s a cold shower.
South Korean brands, which have gained market share in the U.S. over recent years through competitive pricing and refreshed designs, are now facing a 10% disadvantage compared to their Japanese rivals. In a market with tight margins and highly price-sensitive consumers, this measure could have an immediate impact on sales and profits.
The automotive sector is vital for South Korea, accounting for 10.4% of all exports to the U.S.. In 2024, Hyundai Motor and Kia sold over 1.4 million units in the country, establishing themselves as the third-largest automaker by market share. However, this advantage could quickly erode if consumers perceive relative price increases compared to competitors like Toyota or Honda, who benefit from the tariff reduction.
Stalled Negotiations and $350 Billion at Stake
This tariff disparity stems from bilateral negotiations between Washington and Seoul, which have been deadlocked for over a month and a half after an initial agreement announced on July 30. The main sticking point is the South Korean $350 billion (around €323 billion) mega-investment promise into the U.S., especially in sectors like semiconductors, electric vehicles, and energy.
Recently, South Korean Minister of Trade, Industry, and Energy Kim Jung-kwan traveled to New York to meet his counterpart, Commerce Secretary Howard Lutnick. However, the visit ended without tangible progress. The lack of clarity on how the investment will be structured keeps any tariff relief for South Korean brands on hold.
The Semiconductor Factor: Another Storm Approaching
The trade tensions extend beyond the automotive sector. Semiconductors, another of South Korea’s key exports, are also at risk. Last month, Trump announced plans to impose nearly 100% tariffs on integrated circuits and chips from countries he considers unfair competitors.
Though South Korea’s government assured a commitment to “most favored nation” treatment for semiconductors following the July 30 agreement, no binding guarantees exist. Beyond a brief statement from Secretary Lutnick on X (formerly Twitter), no official confirmation has been provided.
Given that Samsung Electronics and SK Hynix are major global providers of DRAM and NAND memory, any increase in tariffs could have profound repercussions on global supply chains for AI, cloud computing, and smartphones.
Japan, the Big Winner
While South Korea grapples with uncertainty, Japan emerges as the big beneficiary. The tariff reduction to 15% not only boosts its short-term competitiveness, but also cements an economic cooperation framework with Washington that includes a $550 billion fund committed by Tokyo for investments in infrastructure, energy, and technology in the U.S.
Japanese Prime Minister Ishiba Shigeru views the agreement as strategic: it reduces trade tensions, ensures stability for automakers, and opens new collaboration opportunities in sectors like clean energy, digitization, and semiconductors.
An Evolving Automotive Market
The U.S. automotive market, valued at over $500 billion annually, is undergoing a transition toward electric vehicles and digital mobility services. In this context, tariff barriers are a decisive factor.
- Toyota can lower prices and strengthen its presence in hybrids and EVs.
- Honda and Nissan will have room to recover lost market share.
- Mazda, with smaller volume, will benefit from a lighter cost structure.
- Hyundai and Kia, despite having factories in the U.S. (Alabama and Georgia), will still import some models from Korea, making them subject to tariffs.
The risk is that, in the medium term, U.S. consumers may opt for cheaper Japanese models, which could diminish South Korea’s presence in key segments like compact SUVs and mid-range sedans.
Political and Business Reactions
In Seoul, the news has been met with worry and frustration. Although Minister Kim emphasized that “the worst-case scenario was avoided” after the July preliminary deal, South Korea now finds itself behind Japan in a crucial sector.
In the U.S., some domestic auto industry pressure groups criticized the Tokyo agreement, claiming it favors foreign automakers at the expense of General Motors, Ford, and Stellantis, which already face high costs for raw materials like steel and aluminum.
In Japan, industry associations welcomed the measure as “a historic opportunity” to revitalize their market share in the U.S., the country’s leading export destination for autos.
Beyond Cars: A Geopolitical Game
Trump’s decision can’t be viewed solely through a trade lens. It’s part of a broader strategy to reconfigure economic alliances in Asia-Pacific, aiming to balance China’s influence. Fostering Japan, a strategic ally and a critical part of the global semiconductor and tech supply chain, also serves geopolitical interests.
Meanwhile, the relationship with South Korea, though strong in defense and security, faces economic tensions. Washington demands more investment guarantees and market access, while Seoul resists commitments that could harm its industrial fabric.
Conclusion: An Uncertain Future for South Korea’s Industry
The tariff cut for Japan marks a turning point. Toyota and Honda gain flexibility, while Hyundai and Kia face a steeper climb. The outcome of ongoing trade negotiations will determine whether South Korea can close the gap, which could impact not only its trade balance but also its strategic weight in the global economy.
Time is ticking, and meanwhile, the South Korean auto industry watches anxiously as Japanese competitors accelerate in the race for the U.S. market.
Frequently Asked Questions (FAQ)
1. What tariffs will the U.S. impose on Japanese cars starting September 2025?
The U.S. will reduce the tariff to 15%, from the previous 27.5% for Japanese vehicles.
2. What tariffs do South Korean cars like Hyundai and Kia still face?
South Korean cars maintain a 25% tariff due to stalled trade negotiations between Washington and Seoul.
3. Why is this change so significant for the U.S. market?
Because it gives Japan a price advantage of up to 10 percentage points over South Korea, potentially shifting market shares for Toyota, Honda, Hyundai, and Kia in key segments.
4. Which other sectors are at risk due to U.S. trade policy?
Besides automobiles, the U.S. is considering imposing nearly 100% tariffs on semiconductors and integrated circuits, which could impact companies like Samsung and SK Hynix.