LG Electronics whose local MD Dan Lim CEO is facing the possibility of a court appearance in the Federal Court after being accused of harassment by the Companies former head of Human Resources, is looking to cut back on their manufacturing operations in Vietnam due to the pressure that Trump Tariff demands are placing on their global business.
In the future TVs and appliances that have in the past been manufactured in China and Vietnam could land in Australia with a Made In the USA or even Mexico.
Currently the Trump administration’s sweeping tariff policy is causing problems for the South Korean Company who are dependent on their US business which is currently facing problems.
The US is LG’s second-biggest market after South Korea, at this stage its not known whether higher material costs and US labour costs will erode profits while also forcing the Company to raise prices.
Locally the business could benefit from Made In China or Vietnam products, due to there being little if any tariffs when shipped to Australia, what’s not known is whether LG will maintain their Vietnam production facilities as well as setting up production operations in the USA.
Yesterday LG announced that they plan to spend $100 million in an effort to expand their current appliance operation in an effort to meet the demands of the US Government.
LG Electronics CEO Willian Cho the former MD in Australia, claims that the Company is looking to manufacture products such as refrigerators and ovens in the USA.
The company also plans to boost output in Mexico, which is exempt from U.S. President Donald Trump’s “reciprocal” tariffs announced in early April.
Management claim that they intend to reduce reliance on Southeast Asia, particularly Vietnam and Indonesia as a manufacturing hub for their refrigerators, however it’s not known what impact this will have on Australia.
“We are closely monitoring the risks associated with changes in U.S. tariff policies,” chief financial officer Kim Chang-tae said during LG’s earnings call in April.
The company is “developing strategies” in production and other areas to “ensure agility in responding to any changes,” Kim said.
Trump announced 46% tariffs on imports from Vietnam and 32% tariffs on Indonesian goods recently.
Analysts claim that it’s critical that LG finds a solution to their US Tariff problem due to their heavy reliance on US sales of their TV’s and appliances, with their global business potentially impacted if their move to the USA pushes up prices.
The risk of a profit squeeze on the business remains they claim.
Another problem for LG is that Washington doubled tariffs on steel and aluminum products to 50%.
Most steel and other materials LG buys comes from Countries other than the USA and this could be a major hurdle as they faces higher procurement costs even with a production pivot to manufacturing in the USA.
Rising costs are hampering LG’s results.
Though sales climbed 7.8% to US$16.6 billion in the first quarter of 2025, operating profit slid 5.7% on higher logistics and materials expenses.
The Company admits that in an effort to improve profit margins, LG is looking at global price rises including in Australia.
