SEOUL, May 16 (NNN-Yonhap) — Shares in Hyundai Motor Group affiliates spiked on Thursday following the news that U.S. President Donald Trump will delay his decision on higher auto tariffs and a possible exemption of South Korea from the penalties.
The Trump administration plans to delay the imposition of tariffs of up to 25 percent on imported cars and parts for up to six months to focus on the ongoing trade negotiations with China, according to foreign media reports.
Moreover, South Korea is reportedly among the countries that will be exempted from the steep penalties sought by the U.S. on national security grounds.
Trump has to decide whether to slap trade penalties on imported cars and parts by May 18 (U.S. time).
Global credit ratings agencies said tariffs on imported vehicles and parts would be negative for most of carmakers, parts suppliers, dealers, retailers and transportation companies.
Moody’s Investors Service said in a recent report that the tariffs, if implemented, would contract Korea’s economic growth this year by 0.3 percentage point.
In its recent report, Fitch Ratings said Hyundai Motor Group has strong new product momentum this year, especially in the sport-utility vehicle segment where it had lagged in recent years.
But the potential penalties could pose great risks to the Korean automaker as the U.S. is the most important market to promote its vehicles for a continued growth, the rating agency said.
As of 11:20 a.m., shares in Hyundai Motor Co., the country’s top automaker, rose 0.8 percent at 129,000 won and its affiliate Kia Motors Corp. jumped 1.9 percent at 42,750 won. Auto parts maker Hyundai Mobis Co. advanced 1.4 percent to 216,000 won, outperforming the broader KOSPI’s 0.5 percent loss.
If the delay is officially announced, it will calm investors’ concerns about Trump’s protectionist turn and could revive their appetite for risky assets, analysts said.
The U.S. Commerce Department began its investigation in May 2018 as Trump asked it to determine the impact of imported cars and parts on national security.
In February, the department submitted its “Section 232” national security report to Trump for a penalty decision.
The U.S. is South Korea’s second-biggest trading partner after China. Korea shipped US$14 billion worth of vehicles to the world’s most important automobile market last year.