Korean Home Appliance and Battery Firms Rethink Strategies
Potential Decline in Price Competitiveness of Korean Products
Various Measures Considered, Including Strengthening U.S. Local Production
U.S. President Donald Trump’s decision to impose tariffs on Canada and Mexico is expected to prompt related industries with production bases in the two countries to revise their strategies.
On the 1st (local time), President Trump decided to impose a 25% universal tariff on Canada and Mexico, and an additional 10% on China. Originally, Mexico was an optimal hub for North American exports due to its low labor costs and benefits from the United States-Mexico-Canada Agreement (USMCA).
Currently, Samsung Electronics and LG Electronics operate factories for home appliances and TVs in Mexico, and Kia also has an automobile factory there. Hyundai Mobis and Hyundai Transys also run production plants. However, with the 25% high tariff by the U.S. becoming a reality, domestic companies that have utilized Mexico as a major production base are reportedly considering countermeasures, according to Yonhap News.
Companies are contemplating strengthening local production in the U.S. as a breakthrough. Especially for final products like automobiles and home appliances, producing locally and selling directly can significantly reduce tariff burdens. LG Electronics is reviewing plans to manufacture refrigerators and other products at its Tennessee plant in the U.S., which currently produces washing machines and dryers, while Samsung Electronics is expected to leverage its local production system established in South Carolina. Both companies have been anticipating various scenarios considering the U.S. presidential election and geopolitical changes, and have been keeping in mind possibilities such as relocating production facilities or changing production sites.
However, since local production costs in the U.S., including labor and exchange rates, are high, expanding local production is expected to be carefully decided after weighing pros and cons.
Canada is the largest core mineral producer in North America, and electric vehicle and battery companies such as LG Energy Solution, POSCO Future M, and EcoPro BM have entered the market there. Canada also has the advantage of being a USMCA member country, making it a strategic base for entering the North American electric vehicle and battery market. Some companies are in the process of building joint factories in Canada or have recently completed them. However, the imposition of a 25% tariff going forward will inevitably cause damage. Therefore, these companies are reportedly carefully monitoring U.S. policies and considering ways to minimize management uncertainties.
Donald Trump, President of the United States, is raising his hand after signing an executive order. Photo by Yonhap News
Furthermore, President Trump has also announced sector-specific tariffs on semiconductors, steel, aluminum, petroleum, gas, and pharmaceuticals. In particular, if additional tariffs are imposed on semiconductors, which are Korea’s main export products, Korea will also be affected. If tariffs raise the prices of Korean semiconductors, their price competitiveness will decline, and demand from major U.S. big tech companies, which are key customers of semiconductors, may decrease.
Samsung Electronics and SK Hynix are building large-scale semiconductor production plants in the U.S., but uncertainty remains high as President Trump is critical of the CHIPS and Science Act (CSA), which provides subsidies for factory investments.
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