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Economy

LG, Samsung consider new US plants to appease Trump

Electronics giants worry new government will tax their Mexico-made products

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Samsung washing machines   © Reuters

SEOUL -- 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.

Trump won the presidential election on an anti-immigration and trade protectionism campaign. He promised to bring manufacturing back to America and after his election, offered companies tax breaks to shift production away from cheaper locations to the U.S.

"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.

LG's announcement comes days after Trump's renewed attack on foreign companies with production lines in Mexico that benefit from cheap labor and free trade. Last week, the president-elect on Twitter slammed Toyota Motor for building a new plant in Mexico, threatening to impose a "big border tax" on the Japanese automaker.

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. Special prosecutors quizzed the company's Vice Chairman Choi Gee-sung on Monday over his role in the company's more than 20 billion won ($16.6 million) donation to two foundations controlled by Choi Soon-sil, a longtime friend of President Park Geun-hye. Choi Gee-sung is the right-hand man of Vice Chairman Lee Jae-yong, heir apparent to the largest South Korean conglomerate.

Prosecutors believe Samsung donated to the Mir and K-Sports foundations and signed a 2.8 million euro ($2.95 million) contract with a company owned by Choi Soon-sil in Germany to bribe her to persuade the state pension to vote in favor of a merger of two affiliates in July 2015 that was vehemently opposed by minority shareholders.

Nikkei staff writer Debby Wu in Las Vegas contributed to this story.

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