The Donald Trump administration's tariff (25%) on automobile parts went into effect on the 3rd at 1:01 p.m. (Korean time), and the tire industry is contemplating measures to mitigate the impact of the tariff. The automobile parts industry reported good performance through the first quarter due to increased sales of finished vehicles, but it expects the full impact of the tariff to begin in the second and third quarters.
Before the tariff took effect earlier this month, the tire industry exported a significant amount of products to the United States. A representative from the tire industry noted, "There won't be much impact from the tariff until the first half of the year, but there will be significant effects starting in the second half when the shipped volumes are depleted."
Major domestic tire companies are seeking ways to minimize the impact of the tariff, as North America accounts for 30-40% of their sales. Hankook Tire & Technology plans to increase production capacity at its Tennessee plant in the United States, although it is scheduled to operate normally next year, prompting a review of the optimal production ratio at regional plants.
Nexen Tire, which has no factories in the United States, produces and ships 90% of its U.S. sales volume from Korea. A representative from Nexen Tire stated, "We are comprehensively reviewing whether adjusting volumes from certain regions will impact profits." Nexen Tire had previously sent production volumes from China to the United States. Kumho Tire plans to respond flexibly, such as pursuing expansions at its factory in Georgia, USA.
Even if domestic corporations increase production capacity in the United States, rising raw material prices have also increased local production expenses. The high labor costs in the U.S. pose challenges for hiring additional personnel.
The fluctuating nature of the Trump administration's tariff policies is also an uncertain factor. A representative from a tire company said, "We are running simulations internally, but it is difficult to predict accurate profits because the policies keep changing."
The tire industry is also contemplating the option of raising prices. Sumitomo, the sixth largest tire company globally, announced that it would reflect the increase in tariffs in its prices in the United States. Other companies, including the global leader Michelin, raised prices earlier this year, taking into account cost increases.