LG & Samsung's Trump Trade Appeasement Strategy

Another University of Birmingham graduate (like myself) is rather well-known for his appeasement strategies.

The year is 2017, and instead of military conflict, the matter foremost on the minds of many is trade conflict. Rhetorically at least, the new American leader begrudges almost everything made elsewhere by foreigners (or even US-based corporations). What's a profit-oriented business concern to do? We've heard of automakers being pressured to keep or add plant capacity Stateside. Ditto for telecommunications firms.Trump is not even in office yet and these sorts of headlines just keep rolling in.

The latest case in point is the Nikkei Asian Review reporting that Korean conglomerates (chaebol) LG and Samsung are keen on building plants Stateside instead of Mexico in order to appease the angry gods...I mean, Trump:

South Korea's two largest electronics companies are considering building factories in the U.S. for the production of home appliances in view of incoming President Donald Trump's "Make in America" pledge. LG Electronics is set to announce its plan to invest in the U.S. to construct production lines for washers and refrigerators while Samsung Electronics is mulling a similar plan ahead of the real estate billionaire's inauguration on Jan. 20.

Let's start with LG. With significant manufacturing facilities south of the border meant to service the vast US market, it's said to be reconsidering future sites based on what policies Trump enacts while in office:

"We are likely to wrap up our discussions on the matter by the end of the first half of this year," said LG Vice Chairman and CEO Jo Seong-jin at a press conference at the Consumer Electronics Show in Las Vegas on Jan. 6. "We are checking ways of productions in the plants, including whether it is okay to assemble parts there."

LG's Chief Technology Officer Skott Ahn also said that his company was keeping an eye on Trump's policy. "We should pay attention to it," Ahn said in an interview with Nikkei Asian Review at the event.

South Korean media reported that LG is considering building a home appliance production line in Tennessee. The company has three production factories in Mexico -- Reynosa, Mexicali and Monterrey -- and most products from these plants are exported to the U.S. tariff-free, thanks to the North American Free Trade Agreement, or NAFTA.

Meanwhile, Samsung is said to be doing the same. Instead of appliances, it's mulling whether to locate electronics assembly operations Stateside:

Previously, he said he would levy a 35% tax on products from Mexico. As Trump pressures foreign companies to invest in the U.S., Samsung Electronics is also discussing ways to establish new plants in the country. The company declined to comment on its plans. Samsung also produces home appliances for the U.S. market in Mexico.

The Trump presidency is a headache for Samsung, which is already embroiled in a political scandal in South Korea.

It seems LG and Samsung are keeping their options open as to what policies Trump will actually enact while in office. That said, they may be miscalculating about giving indications of possibly building Stateside since Trump may call them on it should they ultimately decide to set up shop in Mexico like they've done in the past. Unlike the Japanese who've pooh-pooed Trump dumping on Toyota for planning to build a plant in Mexico, the Koreans may be more...pragmatic.

Historically speaking, however, appeasement strategies aiming to calm would-be tyrants have not been found to work.