|A Kolon Industries plant in Mexico / Courtesy of Kolon Industries|
By Nam Hyun-woo
Kia Motors, Kolon Industries, Hyosung, POSCO and other Korean firms operating plants in Mexico are expressing worries over U.S. President Donald Trump's plan to impose a new 5 percent tariff on goods coming from that country, according to industry analysts, Sunday.
If imposed, the new tariffs will deal a serious blow to Korean companies, especially automobile manufacturers, which have set up factories there to enjoy the benefits of free trade between the U.S. and Mexico, they said.
Trump said in a White House Statement that the new tariffs will be imposed starting June 10. He said they will be removed "if the illegal migration crisis is alleviated through effective action taken by Mexico."
If not, tariffs will go up to 10 percent in July, 15 percent in August, 20 percent in September and 25 percent in October, Trump said.
Analysts said this will directly hit Kia Motors, which has a plant in Nuevo Leon, Mexico.
The plant produced 296,000 vehicles last year, including the K3, which accounted for 11 percent of total output.
Of them, 147,000 or 48 percent headed to the U.S.
"If imposed, the tariffs will have a negative effect on Korean automobile firms that have plants in Mexico," Hana Financial Investment analyst Song Sun-jae said.
"Kia can respond to the tariffs by pushing production at its plant in Georgia, U.S., which currently has the capacity to produce more than 130,000 additional vehicles. However, this does not solve the efficiency drop of Kia Mexico, and it has to tackle the difficult problem of finding new markets in other countries in a limited time."
Hyosung and Kolon Industries, which are running auto parts plants in Mexico, are also monitoring the progress with concern.
Hyosung is operating textile plants for airbags in Torreon, which can manufacture enough textiles for 30 million airbags a year. The company is also running an airbag plant in Ensenada, with a yearly output of up to 9 million a year.
Kolon Industries has also been running an airbag plant in Mexico since 2016
Hyosung said it does not expect serious damage, but is closely monitoring the situation.
The tariffs are expected to affect POSCO's four plants for car plates in Mexico. Though their direct sales to the U.S. account for a smaller portion of its overall sales, POSCO will likely be affected by an expected slowdown in production from carmakers in Mexico.
"Since Korean auto parts firms supply not only Kia Motors Mexico but also GM, Ford, Toyota, Nissan and other global carmakers' plants in Mexico, the impact on those carmakers' exports to the U.S. will negatively affect the auto parts firms' sales too," Song said.
According to the Korea International Trade Association, 203 Korean firms were operating in Mexico as of last year, and 103 of them had manufacturing plants.