February 3, 2025
SEOUL – South Korea’s economy has come under direct impact as US President Donald Trump signed an executive order on Saturday imposing tariffs on Mexico, Canada and China, raising concerns about a prolonged global trade war.
Industry experts warned on Sunday that Korea, heavily dependent on exports, could face significant setbacks if Trump’s tariff war escalates. Major companies, including Samsung Electronics, have manufacturing plants in Mexico and additional trade restrictions could disrupt their supply chains and profitability.
Korean firms strategically expanded their production bases in Mexico after the first round of US trade sanctions against China under the previous Trump administration. Electronics giants such as Samsung and LG, as well as automaker Hyundai Motor Group, bolstered their investments, either expanding existing facilities or establishing new ones.
As a result, Korea’s investment in Mexico surged from $11 million in 2020 to $396 million in 2022.
A production base in Mexico has allowed firms to benefit from proximity to the US and lower labor costs. However, proposed tariffs could drive up prices for products imported from Mexico and Canada.
Samsung currently operates home appliance and television manufacturing plants in Queretaro and Tijuana, respectively. LG also runs production facilities across Reynosa, Monterrey and Ramos. Kia’s Mexico plant produced 253,000 vehicles between January and November last year, including 128,000 K3 sedans exported to the US.
During the recent earnings call on Jan. 23, LG Electronics Chief Financial Officer Kim Chang-tae said, “The second Trump administration is expected to impose high tariffs on China, Mexico, Vietnam and Korea. We plan to mitigate risks by diversifying production locations and working closely with distributors to minimize impacts.”
Although Trump’s latest tariff measures specifically target Mexico, Canada and China, analysts caution that Korea may soon be in the crosshairs if the trade war intensifies. Shortly after his inauguration, Trump instructed the US Department of Commerce to reassess existing trade agreements by April 1, with a focus on addressing unfair trade practices and trade imbalances.
Trump has further hinted at imposing tariffs on key imported goods such as semiconductors, pharmaceuticals, steel, aluminum, copper, petroleum and natural gas. Given that chips are Korea’s largest export item; the nation’s economic stability could be at risk if trade barriers extend to it.
Industry sources stress the urgent need for a strategic response to the escalating trade tensions. “It’s not just about companies operating in Mexico or Canada. Korean firms supplying intermediate goods to China will also be affected,” said an industry source, who asked for anonymity. “The government and businesses must work together to develop a sophisticated countermeasure.”