Assessing the Impact of U.S. Immigration Enforcement on South Korean FDI and Corporate Strategy

The interplay between U.S. immigration enforcement policies and South Korean foreign direct investment (FDI) strategies has emerged as a subtle yet significant factor in shaping trans-Pacific economic dynamics. While direct correlations remain elusive, the broader geopolitical and labor policy shifts under the second Trump administration have created an environment of uncertainty that South Korean corporations are navigating with strategic recalibrations.

Geopolitical Risk and Policy Uncertainty

The Trump administration’s aggressive immigration agenda—marked by mass deportations, border militarization, and the revocation of protections like Temporary Protected Status (TPS)—has introduced a layer of policy uncertainty that extends beyond labor markets. According to a report by the Korea Economic Institute, U.S. policy volatility in trade and immigration has prompted South Korean multinationals to adopt a “wait-and-see” approach, delaying or restructuring investments to mitigate risks [1]. This aligns with academic findings that host-country uncertainty, including geopolitical tensions, negatively impacts foreign investment flows [3].

For instance, the administration’s challenges to the U.S.-South Korea Free Trade Agreement (FTA) and its 25% reciprocal tariff policy have created economic friction, indirectly influencing corporate decisions. South Korean firms, which historically viewed the U.S. as a stable market, now face a dual challenge: navigating U.S. policy shifts while managing domestic pressures in South Korea, where an aging population and rigid labor markets constrain growth [2].

Labor Policy Shifts and Corporate Adaptation

U.S. immigration policies have exacerbated labor shortages in sectors reliant on immigrant workers, such as manufacturing and technology. While South Korean corporations operating in the U.S. have not directly adjusted labor sourcing strategies in response to these policies—data on such adjustments remains sparse—the broader trend toward automation has accelerated. South Korea’s government, recognizing this shift, has prioritized technological innovation, allocating $153.8 million in 2024 to incentivize automation and digital transformation in industries [1].

This pivot reflects a strategic alignment with global trends. As U.S. labor markets become tighter due to restrictive immigration, South Korean firms are investing in AI, cloud computing, and robotics to offset labor constraints. For example, Hyundai and Samsung have expanded automation initiatives in U.S. plants, a move less about direct immigration policy responses and more about preemptively addressing long-term labor challenges [2].

FDI Reallocation and Strategic Pragmatism

South Korean FDI inflows to the U.S. surged to $15.18 billion by 2023 but faced headwinds in 2024 as global FDI contracted to $1.5 trillion [4]. Despite this, the U.S. remained the largest destination for South Korean outflows, underscoring its strategic importance. However, geopolitical risks—such as U.S.-China rivalry and North Korea’s nuclear advancements—have pushed South Korean firms to diversify investments. A 2025 Carnegie Endowment analysis notes that South Korea’s foreign policy has shifted toward “economic security and institutional pragmatism,” with corporations aligning investments with U.S. security priorities while hedging against regional instability [5].

This recalibration is evident in sectors like semiconductors and green energy, where South Korean firms are partnering with U.S. allies to reduce reliance on China. For example, SK Group and LG Energy Solution have expanded U.S. manufacturing hubs under the CHIPS and Inflation Reduction Acts, leveraging U.S. subsidies while navigating immigration-related labor constraints [4].

The Road Ahead

The indirect impact of U.S. immigration enforcement on South Korean FDI lies in its contribution to a broader climate of uncertainty. While South Korean corporations have not directly adjusted labor sourcing or FDI strategies in response to specific policies like TPS revocations, they are increasingly prioritizing automation, diversification, and alignment with U.S. geopolitical goals.

Conclusion

The relationship between U.S. immigration enforcement and South Korean corporate strategy is mediated by larger geopolitical and economic forces. As U.S. policies continue to prioritize border security over labor flexibility, South Korean firms are adapting through technological innovation and strategic reallocation. However, without direct policy reforms addressing labor shortages or enhanced U.S.-South Korea economic coordination, the long-term alignment of these strategies remains contingent on evolving geopolitical dynamics.

Source:
[1] U.S. Policy Uncertainty and South Korean Multinationals' Investment Decisions [https://keia.org/the-peninsula/u-s-policy-uncertainty-and-south-korean-multinationals-investment-decisions/]
[2] South Korean Policy in the Trump and China Era: Broad-Based Technological Innovation [https://itif.org/publications/2025/05/18/south-korean-policy-trump-china-era-broad-based-technological-innovation/]
[3] Host-Country Uncertainty, Regional Diversification, and Foreign Investment [https://www.tandfonline.com/doi/full/10.1080/1226508X.2025.2487973?src=exp-la]
[4] World Investment Report 2025 [https://unctad.org/publication/world-investment-report-2025]
[5] The Transformation of South Korean Progressive Foreign Policy [https://carnegieendowment.org/research/2025/05/the-transformation-of-south-korean-progressive-foreign-policy?lang=en]