Korean Businesses Prepare for Impact of US Tariffs on Canada and Mexico

U.S. President Donald Trump recently announced a significant policy change that is causing concern among Korean companies with operations in Canada and Mexico. Starting this week, his administration plans to impose 25 percent tariffs on goods imported from these neighboring countries.

This announcement was made on a Monday, emphasizing that there would be no delays in implementing these tariffs, which has prompted Korean firms to prepare for the potential fallout.

According to South Korea's foreign ministry, trade between Korea and Canada reached approximately US$14.62 billion in 2023, while trade with Mexico was nearly US$19.8 billion.

As reported by the Korea CXO Institute, there are now 25 Korean conglomerates operating a total of 201 subsidiaries in Canada and Mexico as of the end of 2024. Of these subsidiaries, 110 are based in Canada and 91 in Mexico. The Samsung Group is the largest, with 50 subsidiaries in Canada and 18 in Mexico. The Hyundai Motor Group also has a significant presence, with 16 subsidiaries in Mexico and 12 in Canada.

Mexico has been particularly attractive for Korean companies seeking to export goods to North America due to its low labor costs and favorable trade agreements such as the U.S.-Mexico-Canada Agreement (USMCA). In fact, South Korea ranked 11th among foreign direct investors in Mexico in 2023.

Samsung Electronics operates a home appliance factory in Queretaro and a television factory in Tijuana. Similarly, LG Electronics has production facilities in Reynosa, Monterrey, and Ramos Arizpe. In the automotive sector, Kia Corporation operates a plant in Monterrey, producing around 250,000 vehicles each year, with roughly 150,000 units exported to the United States. Additionally, auto parts manufacturers Hyundai Mobis and Hyundai Transys also have operations in Mexico.

The Korea CXO Institute warns that Korean companies involved in manufacturing vehicles, car batteries, and home appliances in these countries may lose their competitive edge in the U.S. market due to the higher tariffs. An official noted that relocating plants to the United States quickly is not a feasible solution, and companies might need to consider increasing production in their existing U.S. facilities or looking to diversify their markets.

The situation could worsen as Trump intends to impose additional tariffs on specific sectors, including automobiles and semiconductors, starting in April. This move could put further strain on companies like Samsung Electronics and Hyundai Motor Group, especially in their U.S. operations.

In an effort to mitigate these risks, a representative from Kia's Mexican division stated that the company is aligning its strategies with the policies of both the U.S. and Mexican governments.

During a recent visit to Washington, South Korea's Industry Minister, Ahn Duk-geun, discussed tariff exemptions with U.S. officials, including Secretary of Commerce Howard Lutnick and U.S. Trade Representative Jamieson Greer. Ahn expressed South Korea's desire to secure tariff exemptions and emphasized the importance of ensuring that Korean companies are not disadvantaged compared to others if exemptions are not granted.

Korean, Tariffs, Trade