Tariffs Threaten Future of Hyundai and Kia in U.S. Market

Hyundai and Kia are facing mounting financial pressure in the wake of increasing U.S. tariffs on imported vehicles. According to Hyundai’s latest second-quarter earnings report, the company has already suffered significant losses directly attributed to the current 25% import tariff, and with no trade agreement in place between South Korea and the U.S., the worst could still lie ahead.

With the U.S. canceling a planned trade meeting scheduled for this Friday, the likelihood of a new agreement before the critical August 1 deadline has diminished. If no deal is struck, tariffs could double, severely impacting South Korean automakers’ competitiveness in the American market.

What You Need to Know:

• Hyundai’s operating profit dropped 16% YoY to 3.6 trillion won ($2.6 billion)
• Net profit down 22.1%, despite overall revenue increasing 7.3%
• U.S. tariffs cost Hyundai $603.3 million in Q2 alone
• New U.S. tariff rate could increase to 50%+ after August 1
• No trade deal yet between South Korea and the U.S.
• Over half of Hyundai and Kia U.S. sales are from imported vehicles
• Company shares fell 2% following the earnings report

Financial Impact Already Taking a Toll

Hyundai’s Q2 2025 earnings paint a worrying picture. Operating profit fell from 4.3 trillion won ($3.13 billion) to 3.6 trillion won ($2.6 billion), a nearly 16% decline year over year. Net profit dropped even more sharply, down 22.1% to 3.3 trillion won ($2.4 billion). Despite this, overall revenue increased by 7.3% to 48.3 trillion won ($35.2 billion).

According to Hyundai, “higher incentives amid intensifying industry competition, as well as the impact of the global trade environment, weighed on the operating profit.” But the true weight is tariffs—the U.S. import duties alone cost Hyundai 828 billion won, or approximately $603.3 million.

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No Favorable Deal on the Horizon

While the U.S. has negotiated more favorable tariff terms with countries like the UK, Japan, and China, South Korea remains excluded. UK vehicle imports face only a 10% tariff, and Japan has secured a 15% rate. In contrast, South Korea’s automakers are still contending with a 25% levy, with the threat of it doubling to 50% or more after August 1.

If no agreement is reached, Hyundai and Kia could find their pricing structures outmatched—especially against Japanese competitors who are now benefiting from reduced tariffs. The automakers would either need to absorb further losses or increase prices on U.S. models, risking sales volume.

Hyundai and Kia’s U.S. Manufacturing Footprint

Despite the tariff challenges, Hyundai and Kia do have a manufacturing presence in the U.S., which could offer a limited buffer. Hyundai produces the Tucson, Santa Fe, Santa Cruz, Ioniq 5, and Ioniq 9 domestically. Kia builds the EV9, K5 sedan, Sorento, Telluride, and Sportage in the U.S.

However, more than half of the vehicles Hyundai and Kia sell in the U.S. are imported from South Korea, making the potential 50% tariff increase a serious concern. For now, the brands have avoided increasing consumer prices—but that may change rapidly if tariff costs spiral.

A Warning Sign for South Korea’s Economy

South Korea exports more cars to the U.S. than any other product, totaling $34.7 billion last year. The automotive industry is the country’s top export segment, far outpacing the $11 billion worth of semiconductor exports.

With Hyundai and Kia at the center of this economic engine, any prolonged disruption from tariffs could have broader implications for South Korea’s economy. A Hyundai representative warned during the company’s earnings call that while the second quarter was rough, the financial toll in the second half of the year could be worse—though the full extent remains uncertain.

Hyundai Q2 2025 Financial Overview

What Comes Next for Hyundai and Kia?

With the August 1 deadline quickly approaching and no sign of a trade resolution, Hyundai and Kia face a complex and uncertain future in the U.S. market. The companies are navigating an increasingly hostile trade environment, with mounting financial strain and potential pricing disadvantages on the horizon.

If tariffs rise and no compensatory strategy is implemented, Hyundai and Kia may be forced to reduce profit margins, raise U.S. prices, or rethink their production strategies. As of now, their efforts to maintain affordability and competitiveness in the U.S. appear increasingly at risk.