Korean Businesses Prepare for US Tariffs on Canada and Mexico

Korean businesses with operations in Canada and Mexico are preparing for significant changes due to U.S. President Donald Trump's recent announcement regarding tariffs. Observers in the industry noted that President Trump intends to impose a 25 percent tariff on goods from these two neighboring countries starting this week.

On Monday, Trump emphasized that there is no room for delay in implementing these tariffs. According to data from Seoul's foreign ministry, Korea's trade with Canada and Mexico reached approximately $14.62 billion and $19.8 billion in 2023, respectively.

Local corporate data firm Korea CXO Institute reported that 25 Korean conglomerates operated a combined total of 201 subsidiaries in Canada and Mexico by the end of 2024. Specifically, 110 of these subsidiaries are located in Canada, while 91 are based in Mexico. The Samsung Group leads with Samsung Electronics operating 50 entities in Canada and 18 in Mexico. Additionally, Hyundai Motor Group has 16 in Mexico and 12 in Canada.

Mexico has been a particularly attractive export hub for Korean companies looking to penetrate the North American market due to its lower labor costs and the advantages provided by the USMCA (U.S.-Mexico-Canada Agreement). In fact, Korea was ranked 11th in foreign direct investments in Mexico in 2023.

Samsung Electronics manages several production facilities in Mexico, including home appliance manufacturing in Queretaro and TV production in Tijuana. LG Electronics operates factories in Reynosa, Monterrey, and Ramos Arizpe.

In the auto industry, Kia Corp. runs a production plant in Monterrey, Mexico, capable of producing 250,000 vehicles per year, with around 150,000 of those exported to the U.S. Other automotive suppliers such as Hyundai Mobis Co. and Hyundai Transys Inc. also have manufacturing plants in Mexico.

The Korea CXO Institute warns that Korean firms manufacturing vehicles, batteries, and home appliances in these countries could struggle to maintain price competitiveness in the U.S. market if tariffs are implemented. An official from the institute remarked that shifting production to U.S. facilities quickly to avoid tariffs is unlikely, suggesting that companies may need to increase output in their existing U.S. plants or explore new markets.

Compounding the challenges is Trump's plan to introduce additional tariffs targeting the automotive and semiconductor sectors starting in April. This move could impose further financial burdens on companies like Samsung Electronics and Hyundai Motor Group for their operations in the U.S.

An official from Kia's Mexican division indicated that the company plans to navigate this challenge by aligning with both U.S. and Mexican government policies to minimize risks.

During a recent visit to Washington, South Korea's Industry Minister Ahn Duk-geun lobbied for Korea to be excluded from the new tariff plans while discussing the expansion of bilateral cooperation across various sectors. Ahn expressed the desire to secure tariff exemptions if possible and, if not, at the very least, ensure that Korea does not face disadvantages compared to other countries.

Korea, Tariffs, Trade