Implementation of Reciprocal Tariffs: Korean Companies Adjust Production Across Countries to Diversify Risks
Mexico Emerges as a Key Tariff-Free Zone
20% Tariff on Vietnam Makes Production Adjustment Unavoidable
LG Electronics' Mexicali plant in Mexico, which has been producing TVs and monitors, will shift its focus to manufacturing washing machines and dryers starting in September. Existing TV production will be consolidated at the Reynosa plant in Mexico. Previously, refrigerator production volumes from Vietnam, which were facing the prospect of high tariffs, will be concentrated at the Monterrey plant in Mexico. These measures are intended to reduce tariff burdens, minimize costs associated with production relocation, and diversify supply chain risks.
As the United States’ reciprocal tariffs on major trading partners worldwide officially took effect at 12:01 a.m. on August 7 (Eastern Time), domestic home appliance manufacturers are accelerating the relocation of their production bases. Countries subject to high tariffs are seeing reduced production shares, while the transition to tariff-free or low-tariff countries is accelerating.
Mexico is once again drawing attention as an alternative production base for the home appliance industry. Although President Donald Trump once announced a 30% tariff on imports from Mexico, for now, the existing 25% tariff will remain in place for the next 90 days. If the conditions of the United States-Mexico-Canada Agreement (USMCA) are met, products are exempt from tariffs, and currently, TVs and home appliances produced in Mexico benefit from this exemption. Industry insiders believe that the likelihood of high tariffs being imposed on Mexico remains low.
Accordingly, companies with production bases in Mexico are not only maintaining their current operations but are also considering expansion. LG Electronics has been reorganizing its Mexican production bases even before the imposition of tariffs and is in the process of efficiently reallocating its product lines. An LG Electronics representative stated, "Finished products exported from Mexico to North America are currently exempt from tariffs, which is relatively advantageous," adding, "We decided to shift our product lines in Mexico based on the assessment that tariff-free status can be maintained." The representative further explained, "In addition to tariffs, we considered all costs, such as raw material procurement and logistics, and concluded that, for now, Mexico offers the greatest competitiveness."
Samsung Electronics is maintaining its production volumes in Mexico at the Queretaro plant, which manufactures refrigerators, washing machines, and dryers, and at the Tijuana plant, which produces TVs. The company is carefully monitoring the situation, as tariffs have not yet been finalized. A Samsung Electronics representative said, "Our policy is to supply products from the most rational production sites among our global factories," adding, "We are weighing and considering various options."
However, there is still concern that the scope of tariffs could be expanded in the future to include products made in Mexico. Han Areum, Senior Research Fellow at the Korea International Trade Association, analyzed, "The US Department of Commerce is currently conducting additional procedures regarding steel derivative products, so the scope could be expanded," and added, "There may also be reasons why only certain products have been classified as steel derivative products."
Samsung Electronics smartphone manufacturing plant located in Bac Ninh Province, northern Hanoi, Vietnam. Samsung Electronics.
In contrast, Vietnam has been directly hit by high tariffs. With the United States imposing a 20% reciprocal tariff on Vietnam, all home appliances and smartphones produced by Korean companies in Vietnam for export to the US are now subject to tariffs. Increased export costs and weakened price competitiveness are now inevitable.
In particular, smartphones produced by Samsung Electronics at its Bac Ninh and Thai Nguyen plants in northern Vietnam account for more than half of the company’s total output, and most of these have been exported to the United States. However, there is now the possibility that these volumes will be redirected for domestic consumption or to countries other than the United States. Similarly, home appliances produced by LG Electronics and Samsung Electronics in Vietnam for export to the US are now being considered for relocation to Mexican plants. An industry insider commented, "As companies restructure their supply chains, they will choose the most advantageous direction," adding, "Right now, companies are faced with solving a complex equation due to the tariffs."
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