Geopolitical and Regulatory Risks in U.S.-Korea Business Collaborations

In the evolving landscape of global manufacturing, U.S.-South Korea business collaborations have long been a cornerstone of cross-border investment. However, recent immigration enforcement actions in both countries are reshaping the calculus for multinational firms. From large-scale raids at U.S. manufacturing sites to South Korea’s recalibration of labor policies, the interplay of regulatory and geopolitical risks is creating a volatile environment for supply chain strategies.

U.S. Immigration Enforcement: A Case Study in Disruption

The most striking example emerged in late August 2025, when U.S. immigration authorities conducted a historic raid at a Hyundai-LG battery plant in Georgia, detaining 475 individuals—over 300 of whom were South Korean nationals. Described as the largest single-site enforcement action in U.S. Homeland Security Investigations history, the operation followed a multi-month probe into alleged unlawful employment practices [1]. South Korea’s swift diplomatic response, including the dispatch of consular officials to assess humanitarian concerns and Foreign Minister Cho Hyun’s consideration of a U.S. visit, underscored the incident’s geopolitical sensitivity [2].

This event highlights a critical risk for Korean firms: the vulnerability of cross-border labor to U.S. immigration enforcement. Hyundai and LG, which had invested $20 billion in U.S. manufacturing, now face operational disruptions and reputational damage. The raid also exposed the fragility of supply chains reliant on temporary or undocumented labor, particularly in sectors like electric vehicle production, where skilled foreign workers are indispensable [3].

South Korea’s Immigration Policies and Economic Challenges

While U.S. enforcement actions create immediate shocks, South Korea’s own immigration policies are shaping long-term investment dynamics. The country has expanded visa categories such as the E-9 program, which targets labor-intensive sectors like manufacturing, to mitigate domestic labor shortages [5]. However, broader economic challenges—such as trade tensions, regulatory opacity, and sector-specific foreign ownership restrictions—continue to deter foreign direct investment (FDI) [3].

The 2024 IMF Article IV consultation report notes that South Korea’s regulatory framework remains complex, despite reforms under President Yoon Suk Yeol’s “de-regulation” agenda [1]. These challenges are compounded by global supply chain frictions, which have historically driven inflation and market inefficiencies. For U.S. firms, the combination of South Korea’s economic vulnerabilities and its cautious approach to foreign labor creates uncertainty about the stability of manufacturing partnerships.

Geopolitical Realignment and Strategic Adjustments

The incident also reflects a broader recalibration of U.S.-South Korea relations amid intensifying U.S.-China competition. South Korea’s progressive Democratic Party (DP) has shifted toward a more pragmatic foreign policy, aligning with U.S. security priorities while balancing economic interests [2]. This realignment is evident in the recent trade agreement between South Korean President Lee Jae Myung and U.S. President Donald Trump, which emphasizes supply chain alignment with U.S. strategic goals [4].

However, this alignment comes with risks. South Korea’s pursuit of economic stability through U.S. partnerships may inadvertently expose its firms to stricter immigration scrutiny. For instance, the Hyundai-LG raid has raised questions about whether U.S. enforcement actions will target other Korean investments, particularly in sectors deemed critical to national security, such as semiconductors and advanced manufacturing.

Implications for Cross-Border Manufacturing and Supply Chains

The combined pressures of U.S. immigration enforcement and South Korea’s economic challenges are prompting firms to rethink their supply chain strategies. Key considerations include:
1. Labor Mobility: The reliance on foreign workers in both countries necessitates contingency planning for sudden regulatory shifts. South Korea’s E-9 visa expansion offers a partial solution, but U.S. enforcement actions like the Georgia raid demonstrate the risks of over-dependence on temporary labor [5].
2. Operational Costs: Immigration-related disruptions increase compliance and legal costs for firms. For example, LG Energy Solution reported that 46 of its employees were detained in the raid, potentially leading to production delays and reputational costs [2].
3. FDI Trends: South Korea’s openness to foreign investment is constrained by sector-specific restrictions, while U.S. immigration policies create a climate of uncertainty. The revised U.S.-Korea Free Trade Agreement (KORUS) provides some stability through transparent arbitration mechanisms, but its effectiveness may wane if enforcement actions escalate [3].

Conclusion: Navigating a High-Risk Landscape

For investors, the U.S.-South Korea collaboration presents both opportunities and hazards. While the revised KORUS agreement and South Korea’s industrial expertise offer a strong foundation, recent immigration enforcement actions highlight the need for resilience in supply chain planning. Firms must prioritize diversification of labor sources, legal compliance, and diplomatic engagement to mitigate risks.

As geopolitical tensions and regulatory shifts continue to evolve, the ability to adapt to cross-border uncertainties will define the success of U.S.-South Korea manufacturing ventures in the years ahead.

**Source:[1] Republic of Korea: 2024 Article IV Consultation-Press Release [https://www.elibrary.imf.org/downloadpdf/view/journals/002/2025/041/002.2025.issue-041-en.pdf][2] Over 300 Koreans, one Indonesian reportedly held in US battery plant site raid [https://www.thejakartapost.com/business/2025/09/07/seoul-says-over-300-south-koreans-held-in-us-battery-plant-site-raid.html][3] 2024 Investment Climate Statements: South Korea [https://www.state.gov/reports/2024-investment-climate-statements/south-korea][4] South Korean President Lee Expected to Seek Stability in Trade with U.S. [https://subscriber.politicopro.com/article/2025/08/south-korea-leader-lee-expected-to-seek-stability-in-trade-with-u-s-00519753][5] Korea: International Migration Outlook 2024 [https://www.oecd.org/en/publications/international-migration-outlook-2024_50b0353e-en/full-report/korea_9a08bd99.html]