US Tariff Hikes on Mexico and Canada Accelerate Korean Companies' Reshoring "Two Already Returned"

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The United States' protectionist trade stance is once again shaking the global manufacturing landscape. This follows U.S. President Donald Trump's reaffirmation that a 25% tariff will be imposed on Canada and Mexico as planned. Consequently, reshoring movements?where overseas-based companies return to their home country?among Korean firms are expected to become more active.

According to the Ministry of Trade, Industry and Energy on the 4th, two Korean companies with overseas bases have returned to Korea this year.

An official from the ministry stated, "While it cannot be definitively said that the two companies returned solely because of tariffs, the strengthening of the U.S. protectionist trade policy is likely to increase the number of companies considering reshoring."

Industry insiders also analyzed, "Korean companies producing in Mexico and Canada primarily target the U.S. market, so if the 25% tariff materializes, their profitability will be severely impacted."

Mexico and Canada have been preferred production bases due to the United States-Mexico-Canada Agreement (USMCA), but if high tariffs are imposed, export competitiveness could sharply decline. For this reason, major countries including Korea, Japan, and Europe are actively encouraging reshoring. Japan is promoting reshoring by providing repatriation subsidies to overseas production companies.

The European Union (EU) is also strengthening efforts to attract semiconductor manufacturing facilities within Europe through the European Chips Act, while expanding financial and tax incentives to support the return of European companies operating in China to their home countries. In particular, Germany and France are increasing subsidies for specific industries to strengthen their domestic manufacturing bases and are establishing joint European investment funds to diversify supply chains.

Our government is also enhancing support measures for returning companies. The government's cross-ministerial emergency export measures include expanding tax benefits for reshoring companies, increasing subsidy support ratios, and raising the limits on national funding support. Specifically, the subsidy support ratio for reshoring companies has been increased by 10 percentage points compared to before, and the national funding limits for strategic and advanced technology sectors have been raised to 20 billion KRW in the metropolitan area and 40 billion KRW in non-metropolitan areas, respectively.

Additionally, the government is temporarily exempting overseas business restructuring requirements and is considering additional subsidy support ratios for companies affected by tariffs. The government expects that if U.S. protectionism prolongs, these measures will encourage more companies to choose reshoring.

Industry experts point out that the U.S. tariff measures are not merely a change in trade policy but could be a signal for the reorganization of global supply chains. Global manufacturers are likely to relocate production bases or even shift production structures to focus on domestic markets to avoid tariff burdens.

Accordingly, there are opinions that Korea should actively promote reshoring to strengthen its domestic manufacturing base. Another industry insider emphasized, "If the U.S. protectionist stance continues long-term, global companies may not only relocate production bases but also reorganize entire supply chains. It is important for the government to continuously strengthen reshoring policies and support companies to settle stably."

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