South Korean companies are reeling from U.S. President-elect Donald Trump’s latest tariff plans, which involve imposing a 25% tax on all products entering the country from Canada and Mexico and an additional 10% tariff on China.
Major Korean companies such as Kia and Samsung Electronics had strategically set up production facilities in Mexico during Trump’s first term to sidestep the high tariffs imposed on China. Mexico’s zero-tariff agreement with the U.S. under the United States-Mexico-Canada Agreement (USMCA) provided a workaround for these trade barriers.
But Trump has made it clear that Mexico will no longer be exempt from tariffs during his second term. The U.S. goods and services trade deficit with Mexico widened after global exporters expanded production into Mexico, prompting Trump’s second administration to target Mexico with additional tariffs.
Korea’s export-driven economy is bracing for the impact of higher tariffs. Economists warn that if the new tariffs are imposed on Mexico, Canada, and China, Korea’s exports could drop by as much as $44.8 billion.
Korean exporters face a new reality in which Mexico’s appeal as part of the U.S.’s nearshoring strategy is set to diminish. The nearshoring trend, where companies move production closer to their primary markets, has gained momentum in the past few years as it strikes a balance between offshoring’s cost benefits and reshoring’s control and convenience.
Mexico emerged as the biggest beneficiary of nearshoring since 2020, especially after trade sanctions during Trump’s first term (2017–2018) took effect. With its strategic location at the crossroads of North and South America and favorable trade terms under USMCA, Mexico became an attractive production hub for global exporters.
Korean conglomerates, including Samsung, LG, Hyundai Motor Group, POSCO, and CJ, have heavily invested in Mexico to capitalize on these benefits during this period. Korea’s investment in Mexico jumped from $11 million in 2020 to $396 million in 2022, with over 2,000 Korean companies now operating in the country.
Companies that expanded operations in Mexico based on the assumption of zero tariffs stand to be hit hardest by additional tariffs. Kia has relied heavily on its Mexican production facilities as a hub for exports to the U.S. According to Hyundai Motor Group, Kia exported over 60% of the 252,000 vehicles produced at its Nuevo León plant in Mexico.
“If a 25% tariff is imposed [on Mexico], Korean automakers may have no choice but to give up exports to the U.S.,” said Lee Hang-goo, head of the Jeonbuk Institute of Automotive Convergence Technology. “The entire North American automotive supply chain could undergo significant restructuring.”
Other conglomerates are also vulnerable to potential tariff hikes. Samsung Electronics and LG Electronics use their Mexican production bases for North and South American markets. Steelmaking giant POSCO’s Mexican subsidiary, which produces steel for the automotive industry, exports part of its production to the U.S. Korean battery makers building battery production plants in Canada through joint ventures with U.S. firms may also be impacted.
