LG Electronics, one of the world’s leading consumer electronics companies, has announced a sharp decline in its expected operating profit for the upcoming quarter. The South Korean tech giant revealed that higher U.S. tariffs are set to cut its operating profit by nearly half, marking a major setback amid global trade tensions.
This news has raised concerns among investors and analysts, as the company was previously experiencing stable growth across several of its core business divisions, including home appliances, consumer electronics, and electric vehicle components.
In this article, we’ll take a deep look at what’s causing this drop in LG Electronics’ operating profit, how U.S. tariffs are impacting its business, and what the future may hold for the company.
Why LG Electronics Operating Profit Is Expected to Halve
LG Electronics issued a preliminary earnings report indicating that its operating profit for the second quarter of 2025 is expected to fall by nearly 50% year-on-year. This significant drop is largely attributed to increased costs caused by newly imposed U.S. tariffs on imported goods from South Korea and other countries.
The U.S. government recently announced a fresh round of tariffs, targeting a wide range of electronic goods and components. These tariffs, aimed at balancing trade and protecting domestic manufacturing, have hit global companies like LG particularly hard, especially in high-export categories such as:
- Home appliances like refrigerators and washing machines
- TVs and display panels
- Air conditioners
- EV-related components like batteries and infotainment systems
As a result, LG is facing higher export duties, reduced profit margins, and increased cost pressures across its supply chain.
How Much Is the Profit Expected to Fall?
LG Electronics estimates its operating profit for Q2 2025 at approximately ₩800 billion ($580 million), down from ₩1.6 trillion ($1.2 billion) in the same quarter last year. That’s a 50% decline year-over-year, a major drop for a company that has consistently reported steady earnings.
Meanwhile, LG’s expected revenue for Q2 is around ₩20 trillion ($14.5 billion), which represents a relatively flat figure compared to the previous year. This suggests that while LG is still selling at a high volume, its profit margins are being significantly squeezed.
The Role of U.S. Tariffs in LG’s Financial Struggles
1. Increased Cost of Exports
The newly introduced tariffs on South Korean electronics make it more expensive for LG to sell its products in the U.S., which remains its largest overseas market. This added cost either has to be absorbed by LG (cutting into its profits) or passed on to the consumer (which could hurt sales).
2. Supply Chain Disruptions
LG relies on a global supply chain for its components. With U.S. tariffs impacting everything from semiconductors to raw materials, the company faces increased costs across all parts of its manufacturing process.
3. Reduced Competitiveness in U.S. Market
Higher prices for LG products in the U.S. may make them less competitive compared to American-made alternatives or goods from countries not affected by the tariffs.
What Does This Mean for LG’s Core Businesses?
Home Appliance Division
This is LG’s most profitable division, contributing a major chunk to its annual earnings. However, appliances like refrigerators and washing machines are directly impacted by U.S. tariffs. LG could lose market share to local manufacturers like Whirlpool if prices go up too much.
TV and Display Division
This segment is already struggling due to declining global demand and intense competition from Chinese brands. The added burden of tariffs could make things worse, further shrinking profit margins.
Electric Vehicle (EV) Components
LG has been expanding its EV parts division, supplying batteries and infotainment systems to global automakers. Tariffs may raise costs in this emerging sector and delay profitability in a key growth area.
What Is LG Electronics Doing to Minimize the Impact?
1. Exploring New Manufacturing Hubs
LG is reportedly looking at shifting part of its manufacturing outside South Korea to avoid U.S. tariffs. Countries like Mexico, Vietnam, and India are being considered as alternative production hubs.
2. Negotiating with U.S. Authorities
Industry groups and South Korean trade representatives are lobbying the U.S. to reconsider or modify the tariffs. LG may benefit from these efforts if exceptions or revised rates are introduced.
3. Cost-Cutting Measures
The company is already working on improving operational efficiency, reducing non-essential expenses, and streamlining its workforce to offset some of the financial pressure.
4. Focusing on Premium Segments
LG may focus on selling more high-end appliances and electronics in the U.S., where customers are less price-sensitive. This would allow the company to maintain margins despite higher costs.
Analyst Reactions to LG’s Profit Warning
Market analysts are concerned about LG’s short-term profitability, but some remain optimistic about its long-term strategy. According to Daishin Securities analyst Choi Bo-young:
“While the drop in operating profit is disappointing, it reflects external trade factors rather than internal weakness. LG remains a strong brand with diversified operations.”
Investment firms are closely watching how LG adapts to the changing trade landscape and whether it can maintain its market share in the U.S. without severely damaging its bottom line.
Global Impact: How This Affects the Tech Industry
LG is not the only company affected by rising U.S. tariffs. Other global manufacturers, including Samsung, Sony, and even American firms with overseas factories, are facing similar challenges. This could:
- Increase prices of consumer electronics globally
- Slow down innovation due to budget cuts and supply chain disruptions
- Force companies to rework their global manufacturing strategies
Ultimately, the cost of protectionist trade policies may be passed on to consumers in the form of higher prices and fewer product choices.
Can LG Recover From This Profit Decline?
Yes, but it won’t be easy. LG has shown resilience in the past and has a diversified business model that includes:
- Home entertainment systems
- Mobile solutions
- Automotive electronics
- Smart home technologies
Its strong R&D, brand value, and loyal customer base will help it weather short-term setbacks. However, the company will need to act quickly and strategically to:
- Navigate the new tariff landscape
- Optimize its global production
- Maintain product competitiveness in its key markets
Conclusion
The announcement that LG Electronics operating profit is expected to halve due to U.S. tariffs is a stark reminder of how vulnerable even the largest tech companies are to geopolitical shifts. While the immediate outlook may be challenging, LG’s proactive approach—through supply chain changes, lobbying efforts, and cost-saving strategies—suggests that it is preparing to adapt.
Still, the road ahead is full of uncertainties. The global economy is changing fast, and companies like LG must be agile and innovative to survive and thrive in a world increasingly shaped by trade policies, inflation, and shifting consumer behavior.
For now, all eyes are on LG’s official Q2 earnings release and its response strategy in the coming months. Investors, consumers, and industry players alike will be watching closely to see if this is a temporary dip—or the start of a longer-term transformation.
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