Samsung could be shutting down its LCD TV plants in China. Reuters/Kim Hong-Ji

South Korea’s Samsung Electronics and LG Electronics could be pulling the plug on their television-manufacturing plants that are based in China. Industry sources say this is very likely to happen because of the brewing trade war between China and the United States.

The Investor learned from industry sources Monday that Samsung and LG are already thinking of shutting down their LCD TV plants in China. The South Korean companies’ plants in China mainly produce 40-50-inch LCD TVs that are exported to the U.S. Because Donald Trump’s administration are slapping high tariffs on products coming from China, Samsung and LG’s market performance in the U.S. could be affected as well.

It can be noted that the U.S. government decided on March 3 to slap a 25 percent tariff on products coming from China. Sources say the new tariff would be too steep for both Samsung and LG to handle. Hence, both companies feel discouraged to continue operating their plants in China.

“This is pretty much inevitable, since there’s no way we can break even with a 25 percent tariff rate,” a Samsung official said. Meanwhile, an LG official revealed that the LG G7 ThinQ maker is considering a range of options to respond to the trade conflict between China and the U.S. at this point.

There are sources claiming that the neighboring rivals could bypass the problem by shifting the production of their 40-50-inch TV models to different countries. Anyway most of their TVs are being produced in other markets like Mexico. However, both firms have yet to confirm anything.

The brewing trade war between China and the U.S. stemmed from the former’s “Made in China 2025” initiative that aims to upgrade China’s manufacturing base in 10 strategic sectors including robotics, semiconductors, new energy vehicles and aviation, among others, to ensure the country’s economic growth.