Samsung Abandons Mexico Plant Amid Trump’s Trade Policy Uncertainty
Amid escalating trade tensions, Samsung Electro-Mechanics Co. has halted plans to construct a new manufacturing facility in Mexico and dissolved its local subsidiary, signaling one of the first significant corporate adjustments in Asia directly linked to the evolving trade agenda of US President Donald Trump. The decision underscores the growing uncertainty surrounding the future of the US-Mexico-Canada Agreement (USMCA) and its potential impact on global supply chains.
The South Korean electronics component manufacturer, a crucial supplier of camera modules for Tesla Inc.’s electric vehicles, initially established a subsidiary in Querétaro, Mexico, in late 2023. The intent was to build production facilities for automotive camera modules, strategically positioning the factory near key North American customers like Tesla and capitalizing on the zero-tariff benefits offered under the USMCA. However, according to sources familiar with the matter, the project has now been shelved due to mounting concerns over the stability of the free-trade agreement.
“The decision to shut the Mexican entity effectively means Samsung Electro-Mechanics is no longer pursuing the factory,” stated one individual close to Samsung’s planning process. The company had already invested 4.9 billion won ($3.6 million) in the Mexican subsidiary as part of a broader strategy to expand its electric vehicle parts business globally.
The reassessment comes as analysts warn of potential US import duties on Mexican goods potentially surging to as high as 25% should Trump’s policies be enacted. While importers are technically responsible for tariffs, the dynamics of the automotive industry often compel suppliers like Samsung Electro-Mechanics to absorb these costs, diminishing the attractiveness of Mexico as a production hub for exports to the US.
Trump’s renewed calls for a USMCA revision, coupled with warnings of steeper tariffs, are disrupting long-term planning for multinational corporations that have relied on Mexico’s low-cost manufacturing advantages. “In this new environment, a Mexican facility no longer provides the tariff shield it once did,” explained an executive with knowledge of the situation.
The decision is also influenced by a slowdown in electric vehicle demand growth in North America – often referred to as the “EV chasm.” The Querétaro location was specifically chosen for its proximity to Tesla’s Austin, Texas facility. While Samsung currently supplies modules to Tesla vehicles manufactured in Shanghai and Berlin, the company has reportedly struggled to secure sufficient order volume from Tesla and other clients. The recent passage of Trump’s One Big Beautiful Bill Act, which eliminates federal EV subsidies effective September 30, further weakens the economic justification for expanding EV parts capacity in North America.
Samsung Electro-Mechanics is now actively exploring alternative locations for its next-generation EV camera module facility. The US is emerging as a leading contender, with several states actively seeking to attract foreign manufacturers. Eastern Europe, particularly Romania, is also being considered, especially for supplying European clients. Samsung recently established a sales unit in Timisoara, Romania, to bolster its presence in the region.
The impact of Trump’s trade policies extends beyond Samsung Electro-Mechanics. Other Korean tech giants, including Samsung Electronics and LG Electronics Inc., which operate significant manufacturing hubs in Mexico, Vietnam, and India, are under pressure to re-evaluate their global supply chains.
On Friday, Trump announced he had finalized new tariff schedules for 12 nations, though the specific details remain undisclosed, with the duties expected to take effect on August 1. Industry observers suggest that smartphone production, due to its inherent agility, can more easily relocate. However, product lines with specialized manufacturing requirements, such as televisions and appliances, will face greater challenges.
“There is growing concern across the sector about a consumer slowdown triggered by higher tariffs,” noted 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 anticipated to finalize revised production and sourcing strategies once Trump’s tariff details are revealed, with some relocation of production to the US appearing increasingly likely, according to analysts. Sources indicate that both companies have already begun considering moving their Mexican plants to the US to mitigate the impact of the anticipated tariffs.
