On March 26, U.S. President Donald Trump announced 25 percent tariffs on all imported cars and car parts, set to take effect on April 3 and May 3, respectively. That same day marked the grand opening of Hyundai Motor Group’s Metaplant in Georgia, where Executive Chairman Euisun Chung committed to “building the future of mobility with America, in America.” Just two days earlier at the White House, Chung had unveiled a $21 billion investment in the U.S., to which Trump had responded, “[Hyundai will] not have to pay any tariffs,” but the timed tariff announcement – coming so close on the heels of Hyundai’s pledge – only amplified Trump’s message that “tariffs work.” While Hyundai may have positioned itself favorably with Trump, its record-breaking investment drew disappointment in Seoul, where many pointed out that despite the scale of the commitment, no exemptions from Trump’s tariffs were granted. More critically, concerns are mounting that Hyundai’s U.S. expansion to help make America great again could undermine South Korea’s manufacturing base in autos and steel, and cost related jobs at home – all while the country remains technically leaderless, and Washington’s recent trade deals illustrate how big a challenge lies ahead for Seoul.
Hyundai’s Bold Bet on “All in America”
Hyundai’s latest U.S. investment stood out not only for its unprecedented scale, but also for its scope. According to the company, of the $21 billion investment from 2025 to 2028, $9 billion will be invested in expanding Hyundai Motor’s production capacity, raising the company’s annual output in the U.S. to 1.2 million vehicles. This figure includes production across all three of Hyundai Motor’s facilities in America – its plant in Montgomery, Alabama; affiliate Kia Motors’ facility in West Point, Georgia; and the newly launched Metaplant in Ellabell, Georgia. Given that Hyundai and Kia together, according to the Korea Automobile & Mobility Association, produced about 7.23 million vehicles globally in 2023, with 49.1 percent – or roughly 3.55 million units – manufactured in South Korea, Hyundai’s bold push to produce 1.2 million units annually in the U.S. alone, nearly 34 percent of its domestic output, marked a notable shift.
More strikingly, another $6 billion will be invested in building Hyundai Steel’s first overseas production base – a new facility in Louisiana. With the capacity to produce 2.7 million tons of steel annually, the steel mill aims to enhance “the [Hyundai] Group’s agility and flexibility in response to external uncertainties,” reflecting the company’s effort to address both the 25 percent auto tariffs and the 25 percent steel tariffs under Trump 2.0. Considering Hyundai ranked fourth in the U.S. auto sales in 2023 and 2024 – behind General Motors (GM), Toyota, and Ford – with a record 1.7 million units sold last year, the move explains the company’s deepening commitment to the U.S. market – not just as a sales destination, but as a full-scale production hub aligned with Washington’s trade and policy dynamics.
Against this backdrop, it is important to note that the investment marks a pivotal step in Hyundai’s U.S. supply chain strategy, enabling end-to-end production of vehicles sold in the U.S. to take place entirely within the country. It represents an unprecedented move toward full vertical integration – from scrap metal to final vehicle assembly – all in America. Furthermore, Hyundai’s EV battery suppliers located near its car production facilities – such as its joint facilities with SK On and LG Energy Solution, both located in Georgia – are expected to firmly anchor its U.S. manufacturing ecosystem. In his White House remarks, Executive Chairman Chung also pledged to purchase $3 billion worth of U.S. LNG, stating that these combined efforts “will accelerate the localization of [Hyundai’s] supply chain in the U.S., expand our operations and grow our American workforce.” The company expects the investment to generate over 100,000 direct and indirect job opportunities in the U.S. over the next four years, including 14,000 full-time jobs.
Hollowing Out at Home?
What Hyundai’s accelerating supply chain reorientation toward the U.S. ultimately means for South Korea is a potential loss of domestic jobs, primarily in manufacturing. As production increases in the U.S., it is widely expected to reduce domestic output, exports, and employment over time. This concern is particularly relevant given the company’s extensive manufacturing footprint in South Korea, with major production facilities in Ulsan, Asan, and Jeonju. The Ulsan plant, in particular, is touted as the world’s largest single automobile manufacturing complex, housing five independent factories. Hyundai’s affiliate Kia Motors also operates three “AutoLand” manufacturing plants domestically, located in Gwangmyeong, Hwaseong, and Gwangju. However, according to reports citing an expert from the Korea Automotive Technology Institute, domestic vehicle production “could fall by 330,000 units” as the company’s new Metaplant in Georgia could reach an annual output of 500,000 units – even if Hyundai’s 170,000-unit output from Mexico is repatriated to Korea. This projected decline is roughly equivalent to the output of Hyundai’s Asan plant and “could put up to 20,000 jobs at risk, including those in the auto parts supply chain.”
South Korea, having experienced the shutdown of GM Korea’s Gunsan plant in 2018 – once considered the engine of the local economy, along with Hyundai Heavy Industries’ Gunsan shipyard – understands how the loss of an industrial base can devastate an entire city. As workers lost their jobs, the population declined, local businesses collapsed, and the region fell into a worsening spiral. Trump’s tariffs, and Hyundai’s following shift in its supply chain to the U.S., have stirred painful memories of Gunsan for many Koreans – which is why the company’s massive U.S. investment has been met with little enthusiasm at home. Given the circumstances, Hyundai Steel’s recent decision to close its factory in Incheon for the entire month of April, while announcing plans to build a new facility in Louisiana – a project anticipated to create hundreds of American jobs – has only reinforced concerns in Seoul that Korea is shouldering the cost of “America First.”
For Hyundai, Trump’s tariffs may have offered a rationale to expand production in the U.S., creating an opportunity to sidestep some of the long-standing challenges it faces at home. Establishing manufacturing facilities in the American South – where “right-to-work” laws limit union reach and there are no legal caps on working hours – may have seemed more favorable than operating in South Korea, where strong labor unions and the statutory 52-hour workweek cap can shape the industrial environment. Hyundai has long grappled with labor tensions in Korea, driven mostly by repeated confrontations with powerful unions. Most recently, Hyundai Steel partially suspended plant operations for the first time in its history in response to a prolonged wage strike, during which the union argued that urging voluntary retirements in Korea while building a steel plant in the U.S. – where labor costs are higher – lacks logical consistency.
To be fair, Hyundai has also pledged to increase its investment in Korea by 19 percent this year, reaching a record 24.3 trillion won ($16.65 billion), including two EV-dedicated plants – one in Ulsan and another in Hwaseong. Yet, nearly half of the investment is for research and development, not manufacturing. The Korean automaker claims that since the opening of its first U.S. plant in Alabama, Hyundai and Kia’s exports, production, and employment in South Korea have all increased, calling it the “Alabama effect.” In 2004, the year before the Alabama plant opened, Hyundai and Kia’s exports to the U.S. totaled just $9.18 billion, but last year, that figure jumped 198.5% to $27.4 billion, with the number of vehicles exported rising to over 1 million units. While Hyundai attributes the growth to its U.S. plant operations, many in Korea question whether the Alabama effect can continue as more of the company’s manufacturing shifts overseas.
The Hyundai Card Seoul Failed to Leverage
In this context, remarks by Korea’s Trade, Industry and Energy Minister Ahn Duk-geun ahead of the first U.S.-South Korea trade talks in April drew considerable attention in Seoul, as he pledged to seek a “speedy solution” on auto tariffs. However, during the post-talks briefing, when asked about the possibility of lifting those tariffs, Ahn gave a more reserved response, saying, “It’s difficult to predict the outcome when it comes to automobiles.” He explained that the delegation had conveyed the sector’s importance and underscored Korea’s investments in the U.S., but added, “ultimately, sectoral tariff decisions rest with President Trump.” Understandably, many in Seoul lament that Hyundai’s $21 billion U.S. investment might have had greater impact – particularly on auto and steel tariffs – had it been strategically timed and coordinated with the Korean government ahead of the talks.
Hyundai executives, for their part, have sought to address concerns about the production shift. Defending the company’s “virtuous cycle” argument – where building overseas plants enhances brand recognition, drives global sales, and ultimately supports expanded production at home – Hyundai’s Vice Chairman reportedly said, “we believe it’s time to take a more aggressive approach to expanding our presence in the U.S. market,” suggesting that stronger U.S. sales could lead to increased production in Korea. Kia Motors’ CEO echoed this point, telling reporters, “It’s not that we’re shifting production volume from Korea to the U.S.,” and explained that the new plant would cover “the additional demand expected to grow here in America.” Still, knowing Trump’s term can last no more than four years, Hyundai appears to have weighed the long-term cost of exporting under steep tariffs against relocating its production base – and ultimately chose the latter. While Seoul missed the chance to fully leverage the company’s U.S. investment in trade talks, the Korean automaker was spotlighted at the White House, where Trump thanked Hyundai Motor President José Muñoz during the “Investing in America” event.
The Price of Playing by Trump’s Trade Rules
As this unfolds, the UK announced a trade deal with the U.S. last week that includes cutting auto tariffs to 10 percent for the first 100,000 vehicles and eliminating steel tariffs. Although the White House noted that the steel tariff terms are still subject to negotiation, the agreement sets a key precedent, signaling that Washington is willing to discuss tariff rate quotas. However, since the UK exports far fewer cars to the U.S. than South Korea, Seoul is unlikely to benefit from a similar arrangement on autos without deeper concessions. Following his call with the UK Prime Minister Keir Starmer to seal the agreement, Trump told reporters that, for London, “one of the things we did here that we’ll rarely do is on cars,” referring to lowering the auto tariff rate from 25 to 10 percent, “because Rolls-Royce is not going to be built here.” Calling them “super luxury” cars, produced in “a very small number,” Trump contrasted British vehicles with cars from automakers “that make millions of cars, which they’ll now be doing in our country,” thanks to tariffs. Trump’s additional remarks – that “the [baseline tariff] template of 10 [percent] is probably the lowest,” and that “some [countries] will be much higher” due to their trade surpluses with the U.S., followed by “I won’t do that deal with cars” – all point to a tough road ahead for South Korea, whose top export to the U.S. is automobiles.
Riding the momentum, the U.S. also reached a trade deal with China, in which the two rivals agreed to temporarily lower reciprocal tariffs to 10 percent for 90 days. Notably, the deal excludes tariffs on autos and steel – which, for Beijing, remain a lower priority given the limited volume of Chinese exports to the U.S. in both sectors. At the post-deal press briefing, when asked whether he is open to negotiating cars, steel, and aluminum tariffs with China or any other country, Trump reiterated his position, responding, “if they [other countries] want to sell cars in the U.S., they’re going to have to build factories in the U.S.” A similar message was hinted at in Washington’s earlier trade talks with Japan – another major auto exporter to the U.S. – where the U.S. made clear that, for Tokyo, auto and steel tariffs are off the table – a signal that does not bode well for Seoul.
Despite the existing KORUS Free Trade Agreement (FTA) – meant to set South Korea apart from countries without FTAs with the U.S. – and Hyundai’s largest-ever U.S. investment, Trump’s tariffs on Korea are highly likely here to stay. The Korean automaker’s swift move for survival, as echoed by Executive Chairman Chung at the Metaplant opening in Georgia, “We don’t just come to build a plant. We come to put down roots,” therefore, sounds more like a partial farewell to Korea. In this leaderless moment in Seoul, with Washington racing to seal a deal, South Korea’s manufacturing base – and the jobs it supports – is facing one of its toughest tests in recent memory.
To read the article as it originally published, click here.