How Hyundai’s $21 billion pledge could shield it against Trump’s tariffs

Hyundai Motor Group’s surprising $21 billion investment announcement at the White House initiated the automaking company’s full-out expansion in the U.S. market along with the potential alleviation of unpredictable tariff pressure.

It also made Hyundai the first-ever Korean company explicitly mentioned by U.S. President Donald Trump as one that would “not have to pay any tariffs,” though he did not disclose specific details.

The massive investment, which runs through 2028, includes $6 billion to build a Hyundai Steel factory in Louisiana, according to Hyundai Motor Group Executive Chair Euisun Chung, who appeared on the stage to make the announcement, with $9 billion allocated to expanding Hyundai’s U.S. production, including its soon-to-open $5.5 billion manufacturing plant in Georgia.

The remaining funds will support renewable energy initiatives, EV charging infrastructure and further research on robotics and autonomous driving in the United States.

“Hyundai will purchase $3 billion worth of U.S. liquefied natural gas [LNG] to support America’s energy industry and enhance our energy security,” Chung said, specifically mentioning the type of energy that Trump is currently pushing hard to export.

From steel to auto parts and automobiles, Hyundai Steel’s $6 billion factory will largely contribute to the group’s self-reliant supply chain, free of tariffs.

Hyundai Steel’s Louisiana factory, which will start production in 2029 with an annual capacity of 2.7 million tons, will produce automotive steel plates for Hyundai and Kia’s three plants in Georgia and Alabama. The plant will likely help Hyundai cut expenses in tariffs and logistics impacted by Trump’s recent 25 percent tariffs on foreign steel.

Hyundai will also ramp up the capacity of its under-construction Georgia plant to 500,000 units, which will boost Hyundai’s total U.S. production capacity to 1.2 million vehicles. The Georgia plant is slated to start mass production on March 26, adding an initial 350,000 units to that capacity.

If that pans out, Hyundai will be able to secure 70 percent of its total U.S. sales at capacity inside the United States. With a shrinking presence in China, the United States has been the No. 1 market for Hyundai to the extent that one in four new Hyundai vehicles were sold on the U.S. market as of last year.

“Considering the tariff avoidance and logistics expenses, Hyundai will be able to cut roughly $1 billion in costs every year,” said Park Kwang-rae, an analyst at Shinhan Securities.

“The $21 billion investment, the largest ever for a single country, shows Hyundai’s strong determination in North America.”

Some industry watchers cautiously predict that Hyundai’s decision could help Korea dodge Trump’s forewarned tariffs — or at least face lower levies than other countries.

Flip-flopping from his initial “no exception” stance, Trump said he may “give a lot of countries brakes,” right after Chung’s announcement, when asked about his planned reciprocal tariff deadline of April 2.

Trump added that Hyundai would “not have to pay any tariffs” as they would be producing steel and cars in the United States.

“Trump’s remarks don’t mean he won’t entirely impose tariffs on Korea-made cars exported to the U.S. market,” said Chang Sang-sik, head of the Institute for International Trade under the Korea International Trade Association.

“But as he is expected to launch a one-on-one negotiation with countries after the tariff announcement on April 2, Hyundai’s latest investment can contribute as a factor to raise Korea’s bargaining power at the table.”

As Trump’s threat targeted foreign investment, Korean Air last week inked $32.7 billion worth of deals with Boeing and GE Aerospace with U.S. Secretary of Commerce Howard Lutnick in attendance.

Combining Hyundai and Korean Air, Korea has declared over $50 billion in investment either in the United States or U.S. companies in the past week.

Hyundai Motor shares briefly rose as much as 5 percent in Tuesday morning trading to close at 220,000 won ($150) Tuesday, up 3.5 percent from the previous trading day. Kia shares jumped 2.03 percent to 100,700 won while Hyundai Mobis rose 0.54 percent to 281,000 won.

BY SARAH CHEA [chea.sarah@joongang.co.kr]