Geopolitical Risk and Labor Compliance in U.S.-Korea Cross-Border Manufacturing

The intersection of U.S. immigration enforcement and foreign direct investment (FDI) strategies by South Korean firms has become a defining feature of cross-border manufacturing in the Trump administration’s second term. Aggressive policies under the America First Investment Policy, introduced in February 2025, have reshaped the landscape for foreign investors, prioritizing allies like South Korea while imposing stricter scrutiny on competitors such as China. However, these policies have introduced operational risks and compliance challenges that Korean firms must navigate to sustain their U.S. manufacturing ambitions.

Policy Shifts and FDI Trends

The America First Investment Policy explicitly favors investments from allied nations, incentivizing South Korean firms to expand in sectors like semiconductors, electric vehicles (EVs), and battery technology. South Korea became the largest foreign investor in the U.S. in 2024, contributing $2.3% of total FDI, driven by incentives under the CHIPS Act and the Investment Reduction Act [1]. Major projects include SK Hynix’s $3.87 billion semiconductor packaging facility and Hyundai Motor Group’s $7.59 billion joint venture with LG Energy Solution for EV batteries [1].

Yet, the policy’s emphasis on national security has led to heightened scrutiny of supply chains and labor practices. The National Security Presidential Memorandum (NSPM) mandates expedited reviews for allied investments but restricts access to critical infrastructure and technology sectors for firms linked to adversaries [4]. This duality creates a paradox: while South Korea benefits from preferential treatment, it must also contend with the administrative and operational burdens of compliance.

Labor Compliance and Operational Risks

The Hyundai-LG battery plant raid in Georgia in April 2025 exemplifies the risks of noncompliance. U.S. Immigration and Customs Enforcement (ICE) detained 450 workers, including 30 South Koreans on B1 business visas or ESTA permits, which do not authorize manual labor. The incident caused a temporary halt in construction and exposed vulnerabilities in visa management [2]. South Korean firms now face pressure to align with U.S. labor laws, requiring meticulous tracking of visa categories such as C-4 (short-term employment), D-7 (technical training), and E-7 (specialized workers) [5].

This enforcement has forced Korean companies to adopt risk mitigation strategies, including:
1. Visa Compliance Audits: Firms are revising HR protocols to ensure workers operate within permitted scopes, avoiding penalties and reputational damage.
2. Local Talent Partnerships: Collaborations with U.S. vocational training programs aim to reduce reliance on foreign labor, though labor shortages persist in technical fields [4].
3. Supply Chain Diversification: Investments in Southeast Asia and China are being recalibrated to balance U.S. market access with geopolitical stability [5].

Geopolitical Alignment and Strategic Adaptation

South Korean firms are leveraging geopolitical dynamics to mitigate risks. For instance, the K-Defense industry has secured contracts like Poland’s $12.4 billion defense deal, aligning with U.S. strategic interests in countering China [1]. This alignment not only diversifies revenue streams but also strengthens diplomatic ties, indirectly supporting U.S. manufacturing investments.

Moreover, South Korea’s $114 billion investment in U.S. manufacturing over three years reflects a strategic pivot toward advanced manufacturing, driven by U.S. incentives and South Korea’s technological expertise [3]. However, firms must balance these gains with the volatility of U.S. immigration policies, which remain subject to legal challenges and rapid shifts [6].

Future Outlook and Recommendations

The U.S.-Korea economic partnership remains critical for addressing shared goals in semiconductors, energy, and innovation. Yet, South Korean firms must adopt dynamic risk management frameworks to navigate evolving policies. Key recommendations include:
- Enhanced Due Diligence: Regular audits of labor compliance and supply chain resilience.
- Geopolitical Scenario Planning: Preparing for policy shifts by diversifying investment portfolios across allied markets.
- Public-Private Collaboration: Engaging with U.S. and South Korean governments to advocate for stable regulatory environments.

Source:

[1] U.S.-ROK Negotiations: An Opportunity to Reset on Trade, [https://www.csis.org/analysis/us-rok-negotiations-opportunity-reset-trade-investment-and-technology]
[2] Inside the Hyundai raid: A monthslong probe that shook Georgia’s EV ambitions, [https://m.economictimes.com/news/international/global-trends/inside-the-hyundai-raid-a-monthslong-probe-that-shook-georgias-ev-ambitions/articleshow/123747184.cms]
[3] 50 Proven Strategies for Promoting Korean Business Success, [https://www.amworldgroup.com/blog/promoting-korean-business-in-the-us]
[4] White House Releases “America First Investment Policy” Memo, [https://www.whitecase.com/insight-alert/white-house-releases-america-first-investment-policy-memo-outlining-president-trumps]
[5] Republic of Korea (South Korea), [https://www.fragomen.com/countries/republic-of-korea-south-korea.html]