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Former US President Donald Trump. (AFP/Yonhap)

Unease has been mounting at South Korean businesses as the prospect of former US President Donald Trump returning to office this November looks increasingly likely.

In his previous term as president, Trump showed resistance to eco-friendly policies such as the increased use of electric vehicles. Observers are also predicting increased trade protection measures, such as the adoption of a universal basic tariff.

This is translating into deepening concerns for South Korean rechargeable battery, semiconductor, and automobile companies that previously increased their investments in the US in response to policies by the Joe Biden administration.
 
Trump: “You can’t have 100% of your cars electric”

In an interview published Tuesday by Bloomberg Businessweek, Trump was quoted as saying, “You can’t have 100% of your cars electric.”

He also said the Biden administration was distributing huge subsidies that nobody really understood through the Inflation Reduction Act (IRA). His remarks read as suggesting he plans to reverse Biden’s policies of expanding EV use through the IRA. 

The IRA appears to be one of the first things Trump plans to tackle if elected. Implemented in August 2022, its provisions provide tax credits to consumers and tax deductions to businesses for batteries and EVs made in the US.

In South Korea, rechargeable battery companies such as LG Energy Solution, SK On, and Samsung SDI have been investing aggressively in the US through this framework.

But the prevailing view is that the system is more likely to be downscaled than abolished. The US is reaping the rewards from it, including increased IRA-based investment in Republican-dominated regions.

“To abolish the IRA, they would have to go through legislative procedures,” said You Seung-min, the head of geopolitical analysis at Samsung Securities.

“But the interests of individual states differ, and if the Republican Party doesn’t completely control Congress, that would be difficult to achieve,” You added.

“He may attempt to reduce the effects of the IRA through an executive order, which is the president’s prerogative,” he said.

In a report published last May, Korea Institute for Industrial Economics and Trade (KIET) associate research fellow Hwang Kyung-in predicted that there “is a strong chance South Korea’s battery industry will face difficulties once changes to the IRA system begin manifesting.”
 
Automobile trade surplus with US becomes “boomerang”

Automakers Hyundai and Kia are also in a position to be affected by the election outcome. With his rallying call of “America First,” a re-elected Trump may target overseas carmakers in an attempt to reduce the US trade deficit.

Last year, South Korea’s exports of automobiles, EVs, and automobile components to the US totaled US$45.3 billion, a 103% increase from US$22.3 billion four years earlier.

“If Trump returns to the presidency, that is expected to deal a major blow to Korean automobile exports to the US,” said Kim Gyeong-yu, a senior research fellow at KIET, explaining that there was a “strong chance Korea will be included among the countries subject to a universal tariff.”

Currently, automobile and EV exports to the US are either subject to a 2.5% basic tariff or exempt from duties based on the free trade agreement between the two countries. In his platform, Trump has announced plans to impose an across-the-board 10% tariff on all imports, regardless of whether any exemption agreements have been signed.
 
Semiconductor impacts limited amid US-China rivalry

Many observers are predicting the US government will continue supporting the semiconductor industry, which is central to its strategic rivalry with China. The strategy of wooing the computer chip industry to the US while keeping China in check enjoys bipartisan support.

But Trump’s remarks about issues with Taiwan, which he said had “take[n] about 100% of [the US’] chip business,” had some analysts suggesting he could end up funneling the bulk of support funds through the CHIPS and Science Act to US businesses.

A report by the IBK Economic Research Institute said there was “potential for an increase in the subsidy gap between US businesses and other businesses.”

It also predicted that South Korean businesses’ foundry market share could decrease.

By Jun Seul-gi, staff reporter

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