Trump Implements Tariffs on Mexico and Canada... Domestic Companies on Alert

Hyundai and Kia Face Inevitable Hit to Export Competitiveness from Mexico
Samsung and LG Electronics Take Direct Blow to Mexican Production Bases
Companies Cautious, Citing "Realistic Difficulties" in Moving Production to the U.S.
Experts: "Uncertainty Over Tariff Duration... Short-Term Strategies Needed"

As the Trump administration moves forward with imposing a 25% tariff on Canada and Mexico, domestic companies operating locally are facing direct impacts. Companies such as Hyundai Motor, Kia, Samsung Electronics, and LG Electronics, which have utilized Mexico as a production base under the United States-Mexico-Canada Agreement (USMCA) to enjoy tariff-free export benefits to the U.S. market, are now forced to completely revise their export strategies. The automotive industry, which has key production plants in Mexico, is particularly under urgent pressure.

According to industry sources on the 4th, Kia produces about 268,000 vehicles annually (as of 2024) in Monterrey, northern Mexico, with approximately 65% of these supplied to the U.S. market. This plant serves as a core production base for compact cars like the K3 and K4 exported to the U.S., playing a significant role in maintaining market share there. Concerns have arisen that the imposition of tariffs will increase the selling price of Mexico-produced vehicles in the U.S., severely undermining price competitiveness.

Kia is currently exploring alternative export routes. Although the plant has an annual capacity of 400,000 units, its operating rate has significantly declined, and the company is reportedly considering diversifying sales channels in preparation for potential disruptions in exports to the U.S. Earlier in January, during a conference call, Kia stated, "The impact of the Mexico tariffs will affect about 120,000 K4 units produced in Mexico as of 2025," adding, "In the short term, there will be additional costs equivalent to the increased tariffs, but we plan to respond through price adjustments or production cost modifications."

Automotive parts suppliers operating locally also plan to reduce tariff burdens by rerouting exports of Mexico-produced goods instead of direct exports from Korea. According to Shin Young Securities, Hyundai Motor's share of vehicles produced in Mexico among those sold in the U.S. is only 0.4%, so the tariff impact is expected to be limited. However, Hyundai plans to respond to the Trump tariffs by expanding production within the U.S., centered on the Meta Plant America (HMGMA) in Georgia, which began operations late last year.

The electronics industry is also facing significant shocks. Samsung Electronics produces about 10 million units annually of home appliances such as TVs, refrigerators, and washing machines at its Tijuana and Queretaro plants in Mexico. LG Electronics similarly produces over 6 million units annually of appliances including TVs, refrigerators, and ovens in Reynosa and Monterrey, exporting them to the U.S. Since both Samsung and LG have used Mexico as a major export hub to the U.S., the tariff measures are expected to cause considerable damage.

An industry insider said, "With tariffs on Mexico and Canada becoming a reality, domestic companies that have production facilities or source raw materials in these countries will inevitably have to revise their export strategies to the U.S. However, since there is volatility in the tariff orders, immediate decisions to relocate production facilities to the U.S. seem practically difficult, and companies are likely to consider export rerouting strategies."

In this regard, Lee Taegyu, Senior Research Fellow at the Korea Economic Research Institute, assessed, "Korean companies operating in Mexico and Canada will inevitably face significant negative impacts," adding, "The combination of global economic contraction and expanded U.S. protectionism will adversely affect the overall Korean economy." He further noted, "However, since President Donald Trump takes a pragmatic approach, if Mexico and Canada make some gestures to meet U.S. demands, the tariff measures could be temporarily eased. Especially, the automotive and automotive parts industries are likely to be the most severely affected, so companies will first consider short-term responses such as adjusting production volumes and managing inventories."

Companies also view that immediate decisions to increase production facilities or relocate plants within the U.S. will not be easy. An electronics industry official said, "Each company plans to operate optimal production sites for each product according to pre-established strategies in response to changes in trade policies, focusing on minimizing tariff impacts."

Cho Sung-dae, Head of Trade Research at the Korea International Trade Association, also expressed caution. He said, "With the tariffs becoming a reality, companies are forced to act on issues they had previously only considered," but added, "Since the main purpose of these tariff measures is to address illegal drug problems, if the situation calms down, the U.S. government might withdraw the tariffs." He continued, "From a corporate perspective, the increased entry costs and policy risks make major decisions like relocating production facilities to the U.S. realistically difficult."

A business community official explained, "Domestic companies producing locally in Mexico and Canada will inevitably suffer direct hits," but added, "However, some product groups competing with these two countries might see some indirect benefits due to the heightened U.S. tariff barriers." Nevertheless, he analyzed, "The overall U.S. protectionist atmosphere will inevitably negatively impact export-oriented countries like Korea and could also harm economic growth within the U.S., so it remains to be seen whether this policy will be sustained long-term."

Within the industry, there are concerns that the U.S. tariff imposition will not be limited to just these two countries but may expand to other trading partners such as Korea in the future. A business community official said, "The U.S. has started raising tariff barriers beginning with Canada and Mexico and extending to allied countries," emphasizing, "The Korean government must actively respond diplomatically to minimize damage to domestic companies."

This content was produced with the assistance of AI translation services.