Samsung Electro-Mechanics’ plan to build plant in Mexico shelved amid Trump tariffs

Samsung Electro-Mechanics Co., a leading South Korean electronics parts maker, has abandoned plans to build a new manufacturing plant in Mexico and has dissolved its local unit amid growing tensions stemming from US President Donald Trump’s shifting tariff policy.

Analysts said the move marks one of the first clear corporate casualties in Asia tied to Donald Trump’s evolving trade agenda.

In late 2023, the Korean electronics component maker – a key supplier of camera modules for Tesla Inc.’s electric vehicles – set up a subsidiary in the central Mexican city of Querétaro to build production facilities for automotive camera modules.

The goal was to establish a factory close to major North American customers like Tesla, taking advantage of zero tariffs under the US-Mexico-Canada Agreement (USMCA).

But the Korean auto parts maker, an affiliate of Samsung Electronics Co. and a unit under top conglomerate Samsung Group, has now shelved the project, citing growing uncertainty over the future of that free trade deal, people familiar with the matter said on Sunday.

The move underscores how Trump’s renewed calls to revise the USMCA are shaking up global supply chains.

TRILATERAL DEAL IN PERIL

A proposed renegotiation of the trilateral deal, combined with Trump’s warning of steeper new import tariffs, threatens to unravel years of planning by multinationals that have treated Mexico as a low-cost manufacturing hub for the US market.

“The decision to shut the Mexican entity effectively means Samsung Electro-Mechanics is no longer pursuing the factory,” said one of the people close to Samsung’s plans.

Samsung Electro-Mechanics has invested 4.9 billion won ($3.6 million) in the Mexican subsidiary as part of a broader strategy to expand its EV parts business globally.

The reassessment comes amid rising concerns that current zero-tariff privileges for Mexico could be upended.

Analysts now warn of US import duties from Mexico soaring to as high as 25% if Trump’s agenda is enacted.

NON-US FIRMS SCRAMBLE FOR ALTERNATIVES

Although importers technically shoulder tariffs, contract dynamics in the auto industry mean suppliers like Samsung Electro-Mechanics are often forced to absorb such costs.

That risk has significantly diminished the appeal of producing in Mexico for US-bound exports, sources said.

With Trump now pushing for USMCA revisions and hinting at blanket tariffs on 12 countries – a list he said would be made public sometime this month –companies that previously counted on stable trade rules are scrambling for alternatives.

“In this new environment, a Mexican facility no longer provides the tariff shield it once did,” said an executive close to the matter.

‘EV CHASM’

The collapse in EV demand growth in North America – the so-called EV chasm – also weighed heavily on Samsung Electro-Mechanics’ decision to give up its Mexico plant project, sources said.

The Querétaro site was chosen largely due to proximity to Tesla’s Austin, Texas facility. Samsung’s Korean plants currently supply modules to Tesla vehicles manufactured at the US firm’s factories in Shanghai and Berlin.

However, Samsung is known to be struggling to secure sufficient order volume from Tesla and other clients.

The recent passage of Trump’s One Big Beautiful Bill Act through the House, which ends federal EV subsidies as of Sept. 30, further erodes the business case for expanding North American EV parts capacity, industry officials said.

ALTERNATIVES IN THE US OR EASTERN EUROPE

Samsung Electro-Mechanics is now exploring other sites for its next-generation EV camera module facility.

Sources said the US is a leading contender, with several states actively courting foreign manufacturers.

Central Europe, particularly Romania, is also emerging as a viable option, especially for supplying European clients, according to sources.

Recently, Samsung established a sales unit in Timisoara, western Romania, to step up efforts to build out its presence across Europe.

CONTAGION RISK FOR OTHER KOREAN ELECTRONICS MAKERS

Samsung Electro-Mechanics is not alone in struggling to cope with Trump’s protectionist trade policy.

Fellow Korean tech giants, including Samsung Electronics and LG Electronics Inc., which operate major manufacturing hubs in Mexico, Vietnam and India, are also facing pressure to reassess their global supply chains.

On Friday, Trump said he had signed off on documents outlining new tariff schedules to be sent to 12 nations, though the list remains undisclosed. The new duties are expected to take effect on Aug. 1.

Industry watchers said smartphone production is relatively agile and could shift locations more easily. But product lines with strong country-specific specialization, such as TVs or appliances, would face bigger hurdles.

“There is growing concern across the sector about a consumer slowdown triggered by higher tariffs,” said an executive at a Korean electronics company. “That’s particularly acute for products like TVs or home appliances, where shifting production is more complex.”

Samsung and LG are expected to finalize new production and sourcing strategies once Trump’s tariff details are clarified – and some shifts to US-based production appear inevitable, analysts said.

Earlier this year, sources said Korea’s two largest electronics makers, Samsung and LG, are considering moving their plants in Mexico to the US to better respond to Trump’s stiffer tariff policies.

Write to Jeong-Soo Hwang, Eui-Myung Park and Chae-Yeon Kim at hjs@hankyung.com

In-Soo Nam edited this article.