Donald Trump, President of the United States. Photo by Asia Economy Database

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Exterior view of LG Electronics Monterrey plant in Mexico. Photo by LG Electronics

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An image depicting SK Hynix as if it has established a factory locally in the United States. DALL·E3

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Exterior view of Hyundai Motor Group Meta Plant America (HMGMA) in Georgia, USA. Provided by Hyundai Motor Group

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With the launch of the second Trump administration, Korean companies operating factories in low-cost production countries such as Mexico and Vietnam are facing growing concerns. If the US imposes high tariffs on products manufactured in these countries, companies will need to take measures such as adjusting production volumes to minimize the impact. There are even projections that, in the long term, relocating local factories could be considered.

According to the industry on the 31st, major Korean companies in semiconductors, secondary batteries, automobiles, and steel are reviewing plans to reduce production at factories in Vietnam, Mexico, and other countries, while increasing output at US plants in preparation for the Trump administration’s protectionist trade policies.

Previously, US President Donald Trump mentioned that starting next month, a 10% tariff would be imposed on Chinese imports, and a 25% tariff on imports from Canada and Mexico. There are also expectations that tariffs will be imposed on foreign-made semiconductors, pharmaceuticals, and steel.

Currently, Korean semiconductor companies operate production bases in various countries, including the US, China, and Southeast Asia. Samsung Electronics, which runs factories in Austin, US (foundry semiconductors), Xi’an, China (NAND flash memory), Suzhou (semiconductor packaging and testing), and Bac Ninh and Thai Nguyen, Vietnam (semiconductor post-processing), plans to respond by adjusting production volumes among its factories.

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Earlier, Vice Chairman and CEO Han Jonghee stated at the world’s largest electronics and IT exhibition, CES 2025, on the 7th, “There will be no major difficulties” regarding tariff burdens under the second Trump administration. “We have quite a few factories, and since we don’t concentrate production in one place, we plan to respond accordingly.” Samsung Electronics has also decided on an investment of over $37 billion to build a foundry (semiconductor contract manufacturing) plant in Taylor, Texas.

In the case of LG Electronics, the company is not only considering adjusting production volumes between factories but is also reviewing the possibility of relocating its production plant in Mexico to its existing factory in Tennessee, US. LG Electronics is inevitably affected, as it has manufacturing bases in major countries targeted by the US for trade deficits. Currently, the company operates home appliance production plants in Tennessee, US; Haiphong, Vietnam; Nanjing, China; and Monterrey and Reynosa, Mexico.

Kim Changtae, Executive Vice President of LG Electronics, said at last year’s Q4 earnings briefing on the 23rd, “If the US significantly raises tariffs, we may have to consider more aggressive changes to our production site strategy, including relocating production and adjusting the capacity of existing sites.” An LG Electronics official added, “There is a possibility of expanding our home appliance factory in Tennessee,” and explained, “We may transfer some products to Tennessee by increasing production volumes and product categories.”

SK Hynix is also considering expanding its local plant in the US. Currently, the company operates plants in Wuxi, China (DRAM), Dalian (NAND flash), and Chongqing (post-processing). In Indiana, US, SK Hynix has announced plans to invest $3.87 billion to build an advanced post-processing and R&D-related production facility, and is expected to proceed with this plan.

Hyundai Motor Group is the Korean conglomerate most sensitive to changes in US policy. Last year, one out of every four vehicles sold globally by Hyundai Motor and Kia was sold in the US, making the US an extremely important market for the group.

To respond to policy changes under the new Trump administration, Hyundai Motor Group has replaced key executives with US experts. President and CEO Jose Munoz is a US citizen and a North American sales expert with nearly 20 years of experience in the region. In addition, Hyundai Motor has hired former US diplomat Sung Kim as head of overseas government affairs to maintain close communication with the US government.

Hyundai Motor Group has also established a local production system in the US to prepare for tariffs. The existing Hyundai Motor Alabama plant can produce 400,000 units, the Kia Georgia plant 340,000 units, and the newly launched Hyundai Motor Group Metaplant America (HMGMA) adds another 350,000 to 400,000 units, bringing the group’s total US production capacity to about 1.1 million units. As of last year, 65% of Hyundai Motor and Kia’s US sales could be supplied by local production.

The impact of additional tariffs on Mexico or Canada is also expected to be limited. While Kia operates a plant in Mexico, the plant’s utilization rate was only in the 60% range last year, and the group’s main models popular in the US, such as the Kia Sportage and Telluride, are all produced at US or domestic plants, so the impact of tariffs is expected to be limited. Lee Seungjo, Executive Vice President of Hyundai Motor’s Planning and Finance Division, said, “We are analyzing and preparing countermeasures for each scenario regarding the Trump administration’s tariff policies,” adding, “Since Hyundai Motor has a high proportion of local production in the US, the impact of tariffs will be less significant compared to competitors such as Japanese automakers.”

The steel industry is also reviewing various possibilities to prepare for tariffs. Hyundai Steel is considering building an automotive steel plate production base in the US. A Hyundai Steel official said, “This is partly to respond to tariffs and partly to support Hyundai Motor’s global business. However, it seems difficult to build a blast furnace steel mill as it does not fit with the carbon neutrality policy.”

The battery industry is also keeping an eye on the possibility of US tariffs and monitoring state-level policies. A Samsung SDI official said, “If President Trump imposes more tariffs on China, Korea may benefit indirectly,” adding, “For energy storage systems (ESS), we plan to install many in project-based customer regions such as California and Texas.”

Experts also advise that detailed strategies such as relocating factories and adjusting production volumes between plants are necessary. Kim Moontae, Head of Industrial Policy at the Korea Chamber of Commerce and Industry, said, “Companies with local plants in the US are considering how much they can adjust US production and how much tariff burden they can reduce. Those without US plants must consider whether to invest in building one, but this is not an easy decision.” Regarding the possibility of relocating factories from low-cost countries, he said, “This is what the Trump administration is aiming for, but since relocation requires comprehensive judgment, it should be considered as an option if tariffs are actually imposed.”

However, even if local production in the US increases, there is no guarantee of safety. On the 29th, Howard Lutnick, nominee for US Secretary of Commerce, mentioned the possibility of reviewing the semiconductor and battery subsidies promoted by the Biden administration. Even if the subsidy policy is maintained, there may be additional conditions or investment requirements.

Shin Wonkyu, Visiting Research Fellow at the Korea Economic Research Institute, said, “Even when the US Department of Commerce imposed a 57.37% tariff on Hynix Semiconductor in 2003, sales actually increased. By increasing transactions between the headquarters and branches, the company was able to supply more to its US plant and maintain internal production sales.” He added, “However, it is necessary to introduce special provisions to relax regulations so that internal transactions can be handled flexibly in Korea.”