The US Immigration Enforcement Surge: Implications for South Korean FDI and Manufacturing Exposure

The U.S. immigration enforcement surge under President Donald Trump’s "One Big Beautiful Bill" (H.R. 1) has created a seismic shift in the economic and regulatory landscape, with profound implications for South Korean foreign direct investment (FDI) in U.S. manufacturing. By allocating $170.7 billion over four years—$45 billion of which targets expanded detention and deportation efforts—H.R. 1 has intensified ICE operations, including high-profile raids on industrial sites like the Hyundai-LG Energy Solution battery plant in Georgia, where 475 workers (over 300 South Korean nationals) were detained in September 2025 [1]. This article analyzes the strategic risks and sectoral reallocations facing South Korean firms amid this enforcement surge, emphasizing the interplay between policy volatility, labor constraints, and corporate adaptation.

Economic Implications: Labor Shortages and GDP Drag

The aggressive enforcement of immigration policies has exacerbated labor shortages in sectors reliant on immigrant labor, including agriculture, construction, and hospitality. According to a Dallas Fed study, reduced unauthorized immigration has already dragged U.S. GDP growth by 0.8 percentage points in 2025 compared to baseline projections [4]. For South Korean firms, this creates operational risks in labor-intensive manufacturing phases, such as equipment installation and calibration at EV battery plants. The Georgia raid, for instance, halted construction at a $7.59 billion joint venture, exposing vulnerabilities in reliance on short-term visa programs like B-1 and ESTA, which are not designed for manual labor [5].

Sectoral Exposure: High-Tech Manufacturing and Visa Gaps

South Korean investments in U.S. advanced manufacturing—particularly in EVs and batteries—face unique challenges. The Hyundai-LG incident underscored a critical mismatch between U.S. visa frameworks and the needs of high-tech projects. South Korean firms, which had pledged $350 billion in U.S. investments under a 2025 trade deal, now confront a "visa gap" for technical workers, prompting calls for an E-4 visa category tailored to specialized manufacturing roles [3]. This gap has forced companies to reassess timelines and compliance protocols, with some delaying projects or renegotiating contracts to account for enforcement risks [2].

Risk Mitigation Strategies: Compliance, Automation, and Diversification

South Korean firms are adopting multifaceted strategies to mitigate exposure:
1. Compliance Overhauls: Companies like Hyundai and LG Energy Solution have initiated internal audits to ensure subcontractor adherence to U.S. immigration laws, while the South Korean government has intervened diplomatically to secure repatriation agreements for detained workers [6].
2. Automation Investments: To offset labor shortages, firms are accelerating automation in production lines. For example, LG Energy Solution has announced a 15% increase in robotics deployment at U.S. facilities, reducing reliance on manual labor [7].
3. Geographic Diversification: South Korea is recalibrating its FDI strategy to reduce overreliance on the U.S. market. Recent investments in Vietnam and Mexico—where labor regulations are more flexible—reflect a shift toward regional diversification [8].

Strategic Reallocation: Balancing Reshoring and Resilience

While U.S. reshoring initiatives remain a priority for South Korea, the enforcement surge has necessitated a recalibration of risk-return tradeoffs. The Trump administration’s demand for "Made in America" compliance—requiring firms to hire U.S. workers—clashes with labor shortages in technical sectors, forcing firms to innovate in workforce training. Hyundai, for instance, has partnered with U.S. community colleges to upskill local workers for battery plant roles, blending reshoring goals with on-the-ground realities [9].

Conclusion: Navigating Uncertainty in a Shifting Landscape

The U.S. immigration enforcement surge under H.R. 1 has introduced significant volatility for South Korean FDI, particularly in manufacturing. While firms are adapting through compliance reforms, automation, and geographic diversification, the long-term viability of U.S. investments hinges on policy stability and visa reform. Investors must weigh these risks against the strategic value of U.S. markets, recognizing that sectoral reallocations and contingency planning will remain critical in an era of heightened enforcement.

Source:
[1] South Korea outraged, confused by U.S. immigration raid [https://www.washingtonpost.com/world/2025/09/08/south-korea-us-immigration-raid-tensions/]
[2] ICE Raid Creates Chaos For Korean Companies [https://insideevs.com/news/771587/critical-materials-september-8-2025/]
[3] South Korean Government Holds Emergency Meeting with Major U.S. Investing Firms Over Critical Visa Issues [https://serrarigroup.com/south-korean-government-holds-emergency-meeting-with-major-u-s-investing-firms-over-critical-visa-issues/]
[4] Declining immigration weighs on GDP growth, with little ... [https://www.dallasfed.org/research/economics/2025/0708]
[5] ICE's Raid on Korean Workers and Trump's Clashing [https://time.com/7315276/trump-immigration-raid-south-korea-workers-georgia-foreign-investment-analysis/]
[6] South Korean companies admit cutting corners on US visas but..., [https://www.reddit.com/r/electricvehicles/comments/1nbql0h/korean_companies_admit_cutting_corners_on_us/]
[7] South Korea Commercial Ice Flaker Market, [https://www.linkedin.com/pulse/south-korea-commercial-ice-flaker-market-dynamics-oejhe/]
[8] South Korea struggles with uncertainty over U.S. trade ... [https://www.aol.com/news/south-korea-struggles-uncertainty-over-100000516.html]
[9] How Hyundai Raid Could Backfire on Trump: 'Optics Look ... [https://www.newsweek.com/how-hyundai-raid-could-backfire-trump-optics-look-terrible-212662]