The expiration date for the reciprocal tariff waiver designated by U.S. President Donald Trump is approaching on July 8. However, the only countries that have finalized trade agreements during the waiver period are the United Kingdom and Vietnam. Early negotiations with Japan and the European Union (EU) have not easily bridged differences.
Kim Seong-kun, a researcher at Mirae Asset Securities, highlighted that automobile tariffs are a key issue. Japan, which accounts for more than 30% of its exports to the U.S. with automobiles and parts, is advocating for a reduction in automobile tariffs. The EU also wishes to lower automobile tariffs, as the U.S. is its largest export market for automobiles.
However, President Trump has stated his intention to maintain the 25% tariff on automobiles, separate from the reciprocal tariff. He has even mixed in the phrase "very spoiled" while issuing warnings. The universal and reciprocal tariff rates announced on April 2 were 20% for the EU and 24% for Japan, but he mentioned that they could be increased to 50% and 35%, respectively.
Automobile tariffs are also a critical issue for Korea. According to the Korea International Trade Association, among the $50.94115 billion in exports to the U.S. from January to May this year, automobiles and parts accounted for 32.5% ($16.56399 billion). If Korea brings automobile tariff reductions to the negotiation table, it could imply that President Trump might threaten with even higher reciprocal tariffs, similar to the cases of Japan and the EU.
With the end of the reciprocal tariff waiver approaching, the likelihood that the Trump administration will complete negotiations with all major countries is slim. President Trump has two options: to notify each country of the reciprocal tariffs or to extend the waiver period to negotiate.
Kang Dae-seung, a researcher at SK Securities, advised that one should keep in mind the possibility of enforcement. The implication is that President Trump is likely to seek to offset a lack of tax revenue with tariffs, as he has been focused on the "One Big Beautiful Bill Act (OBBBA)," which contains large tax cuts.
If there is no turnaround, the tariff burden on Hyundai Motor and Kia is expected to become significant starting in the third quarter (July to September) of this year. Hanwha Investment & Securities estimated that the tariff impact on Hyundai Motor and Kia would amount to 4.9 trillion won for the entire year, leading to an approximately 18.1% reduction in their annual operating profit. Furthermore, by 2026, the cumulative tariff impact on the two corporations is projected to increase to 9.1 trillion won.
One fortunate aspect is that this tariff burden has been reflected in market projections. According to financial information company FnGuide, securities firms have revised Hyundai's annual operating profit estimate down from 15 trillion won in January to 13.11 trillion won currently, and Kia's annual operating profit estimate was also lowered from 12.61 trillion won to 11.34 trillion won during the same period.
Reflecting the decline in profits, the average target stock price for Hyundai proposed by nine securities firms is 249,500 won, while Kia's is 127,560 won. This represents increases of 16.9% and 27.6% compared to the closing prices on the 2nd, respectively.