Assessing the Impact of ICE Raids on U.S.-Korea Trade and Foreign Manufacturing Investments

The U.S.-South Korea trade relationship, anchored by the KORUS FTA and mutual investments in semiconductors, automotive, and textiles, has faced unprecedented turbulence in 2025. Central to this disruption are ICE enforcement actions, particularly the high-profile raid at a Hyundai-LG Energy Solutions plant in Georgia, which detained 475 South Korean nationals. This incident, coupled with the Trump administration’s America First Investment Policy and steep tariffs, has reshaped geopolitical and regulatory risks for cross-border manufacturing partnerships.

The Hyundai Plant Raid: A Diplomatic Flashpoint

In September 2025, ICE’s largest single-site enforcement operation targeted a Georgia plant operated by Hyundai and LG Energy Solutions, detaining 475 individuals, most of them South Korean nationals. U.S. officials framed the raid as a crackdown on “unlawful employment practices,” while South Korea condemned it as a breach of diplomatic norms. President Lee Jae Myung’s government pledged “all-out efforts” to protect its citizens and corporate interests, with Hyundai suspending business trips to the U.S. and initiating internal compliance reviews [1]. The incident strained bilateral relations, with South Korea’s foreign ministry warning of potential retaliatory measures and questioning the reliability of U.S. commitments to its allies [2].

This raid exposed vulnerabilities in U.S. manufacturing sectors reliant on immigrant labor. South Korea’s $12.6 billion investment in Georgia alone is now under scrutiny, as ICE’s aggressive enforcement risks deterring foreign capital. The incident also highlighted the fragility of supply chains in industries like electric vehicle batteries, where labor shortages could delay production timelines and inflate costs [3].

Labor Shortages and Supply Chain Disruptions

Immigrant labor has long underpinned U.S. manufacturing, particularly in sectors with complex global value chains. Studies indicate that a 10% increase in immigrant populations correlates with a 4.5% rise in exports to home countries, underscoring their role in facilitating trade [4]. ICE’s intensified raids, however, have created a climate of fear among immigrant workers, reducing their willingness to assert labor rights or report workplace violations. This has exacerbated labor shortages in industries like textiles and automotive, where cross-border collaboration with South Korea is critical [5].

For example, the semiconductor sector—where South Korea accounts for 20.8% of global exports—relies on U.S. immigrant labor for high-skill roles in R&D and production. Disruptions in labor mobility could delay innovation cycles and strain partnerships like SK Hynix’s $3.87 billion investment in U.S. advanced packaging facilities [6]. Similarly, the automotive industry, which saw South Korea export $34.74 billion in vehicles to the U.S. in 2023, faces risks from delayed production schedules and increased wage pressures [7].

Regulatory Risks Under America First

The Trump administration’s America First Investment Policy has further complicated the landscape. While it prioritizes investments from allied nations like South Korea, it imposes stringent scrutiny on projects in “sensitive sectors” such as semiconductors and AI. South Korean firms must now navigate a dual-track system: fast-tracked approvals for non-strategic investments versus heightened regulatory hurdles for projects deemed critical to U.S. national security [8].

Simultaneously, Trump’s 25% tariff on South Korean auto exports—part of a broader $350 billion trade deal—has created economic uncertainty. South Korea’s pledge to invest $150 billion in U.S. infrastructure and LNG purchases was a calculated move to mitigate these tariffs, but the policy’s transactional nature leaves room for future renegotiations [9]. Additionally, South Korea’s proposed digital platform legislation, modeled after the EU’s Digital Markets Act, risks complicating U.S. tech firms’ access to the Korean market, further straining negotiations [10].

Geopolitical Implications and Future Outlook

The U.S.-South Korea alliance is now defined by a delicate balancing act. While Seoul seeks to deepen economic ties with Washington, it also diversifies supply chains to reduce reliance on U.S. markets—a strategy evident in its growing partnerships with Japan and the EU [11]. Meanwhile, U.S. policymakers must weigh the short-term gains of protectionist policies against long-term risks to alliance stability.

For investors, the key risks lie in regulatory volatility and supply chain fragility. South Korean manufacturers should prioritize dual sourcing, localizing critical components in the U.S. while maintaining alternative production hubs in Southeast Asia. U.S. firms, in turn, must advocate for clearer immigration policies that balance labor needs with enforcement goals.

Conclusion

The ICE raid at the Hyundai plant and the broader America First agenda have redefined U.S.-South Korea trade dynamics. While direct links between ICE enforcement and trade disruptions remain unproven, indirect effects—such as labor shortages, regulatory complexity, and diplomatic tensions—pose significant risks. Investors must navigate this landscape with strategic foresight, leveraging geopolitical insights to mitigate exposure while capitalizing on opportunities in resilient sectors like semiconductors and green energy.

Source:
[1] ICE arrests at a Georgia Hyundai plant create new tension with South Korea [https://www.gpb.org/news/2025/09/06/ice-arrests-at-georgia-hyundai-plant-create-new-tension-south-korea]
[2] South Korea Is Pissed at Trump After Massive ICE Raid at Hyundai Plant [https://www.yahoo.com/news/articles/south-korea-pissed-trump-massive-175920406.html]
[3] Global Immigration Update Archives — ABIL [https://www.abil.com/category/global-immigration-update/]
[4] Beyond Borders: The Effects of Immigrants on Value [https://www.mdpi.com/2227-7099/12/9/222]
[5] Work-Related Immigration Policy in the United States [https://journals.openedition.org/rdctss/1381]
[6] U.S.-ROK Negotiations: An Opportunity to Reset on Trade [https://www.csis.org/analysis/us-rok-negotiations-opportunity-reset-trade-investment-and-technology]
[7] South Korean foreign trade in figures - Santandertrade.com [https://santandertrade.com/en/portal/analyse-markets/south-korea/foreign-trade-in-figures]
[8] America First Investment Policy [https://www.whitehouse.gov/presidential-actions/2025/02/america-first-investment-policy/]
[9] South Korea Gets Its Trade Deal with the United States [https://www.csis.org/analysis/south-korea-gets-its-trade-deal-united-states]
[10] How AI Cooperation Can Save the U.S.-ROK Trade Talks [https://www.csis.org/analysis/how-ai-cooperation-can-save-us-rok-trade-talks]
[11] Decoupling, De-risking, and South Korea's Strategic Challenges [https://keia.org/the-peninsula/decoupling-de-risking-and-south-koreas-strategic-challenges/]