Seoul: Samsung Electronics Co. and LG Electronics Inc. are urgently evaluating the repercussions of the United States' recent decision to impose a 50 percent steel tariff on home appliance imports, as reported by industry sources on Friday. This move by Washington has prompted the two South Korean electronics giants to consider their options in mitigating potential impacts on their business operations.
According to Yonhap News Agency, the U.S. Commerce Department has issued a notice on the Federal Register stating that the new tariff will apply to various home appliance imports, including refrigerators and washing machines. The tariff will be calculated based on the steel content value in each product and is set to take effect on June 23. Despite having manufacturing facilities in the U.S., both Samsung and LG primarily produce washing machines locally, leaving other significant products manufactured abroad, such as in South Korea, Mexico, and Vietnam, vulnerable to the tariff.
South Korean home appliance manufacturers significantly depend on their Mexican production facilities for exporting goods to the U.S., with these shipments valued at around $2.4 billion. Consequently, the total trade volume potentially affected by the new tariff measure is estimated to be approximately $3.84 billion. Market research firm TraQline reported that Samsung Electronics and LG Electronics together held a 42 percent share of the U.S. home appliance market in sales during the first quarter of this year, with LG at 21.2 percent and Samsung at 20.8 percent.
An anonymous industry official mentioned, "We are closely analyzing the impact of the latest U.S. action, particularly within the relevant business divisions. We are exploring a range of possible responses." The anticipated increase in production costs due to the tariff, given the high steel content in home appliances, is expected to squeeze profit margins. LG had already suggested potential price hikes during its first-quarter earnings conference call.
Economics professor Hur Joon-young from Sogang University commented, "If tariffs drive up prices, Korean firms may lose price competitiveness compared to U.S. manufacturers. In the long term, they may have to consider relocating more production to the U.S." In response, both Samsung and LG are reassessing their global manufacturing strategies. Samsung announced plans to expand premium offerings and adjust production sites to lessen tariff exposure.
Kim Dae-jong, a business professor at Sejong University, suggested, "The most effective solution would be to increase production volume within the U.S. to bypass the tariff. At the same time, the South Korean government should also engage in trade negotiations to seek tariff relief." LG Electronics is reportedly contemplating a gradual shift in the production of washers and dryers to its Tennessee plant, aiming to increase the proportion of U.S.-bound sales covered by local manufacturing.
LG's CEO, Cho Joo-wan, stated in April that establishing a manufacturing base in the U.S. would be a "last resort," highlighting the company's intention to first explore other strategies, such as changing production sites or raising prices, to address the tariff challenge. In light of the new U.S. tariff, South Korea's Ministry of Trade, Industry, and Energy convened an emergency meeting with industry representatives in Seoul to discuss possible responses. The ministry committed to devising support measures for local companies affected by the tariff and maintaining communication with the industry to develop potential solutions.