Everything Korea: November 14 Episode: Trump and South Korea Trade
I would not be fitting without sharing my thoughts on the recent US presidential election and its potential impact on US Korea global business. To many in Korea the election results are troubling… another layer of stress and concern amid a downturn in Korean exports.
Trade agreements, US military support for South Korea and dealing with North Korea top the list. On the trade agreement front, I was a supporter of KORUS FTA both prior to its ratification and contributing a number of high profile articles on the benefits of the treaty.
More so, I’ve commonly referred to KORUS FTA is news articles, interviews and speaking engagements.
My clients Hyundai Motor America, Kia Motors America and well as Mobis Parts America benefit from the treaty… although I’m told 60% of the two OEMs finished product sold in America are made in US plants. (Some engines and a number of Tier 1, 2 and 3 components are still imported, but much less than when the plants were established).
Frankly I am more concerned with trade agreements with Mexico. Korean Groups, Hyundai, Samsung and LG operate plants across Mexico for local demand and export to America.
As an example, a new Kia Motors Mexico plant opened earlier in 2016 with plans to supply up to 80% of their capacity for export. A heavy trade tariff on Mexican goods exported to the US would be troubling not only to Kia, but a growing wave of Korean Tier providers. On a side note, opening a plant in Mexico for an OEM is not only about labor costs and savings, but eliminates a heavy tariff on vehicles the brand also wishes to imports into Mexico.
In addition and less know as another example is Hyundai Motor Group affiliate Hyundai Translead, who I have also supported. First developed under the maquiladora program, trailers made in the Mexico plant currently are sold in the US---check out the back of a Wal-Mart trailer you see on the highway for the Hyundai logo… or this Hyundai Translead video. https://youtu.be/aTbl0D5T42o
As for Samsung Electronics, since the 1980s, with the construction of an electronics complex (SAMEX) in Tijuana, where TVs, color monitors, and mobile phones are currently being produced. Samsung Electronics Mexico (SEM), a local sales subsidiary, was established in 1995, and now the operation has been expanded to include refrigerator and air conditioner production. Samsung Electronics also has local production of side-by-side refrigerators, front-loading washing machines and other high-end appliances.
All said, Detroit's Big Three automakers -- GM, Ford and Chrysler -- all have production plants in Mexico, and any hefty tariff would impact them as well. In addition, GM’s Korea plants produce cars for the US market.
With more questions that answers, I’ll be revisiting the impact of the elections as it unfolds over time. So stay tuned.
Oh one more thing
Regarding North Korea, I see with President- elect Trump's unpredictable, and aggressive way of thinking it may make Pyongyang more cautious about its military provocations.