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There are rising concerns within South Korea that if Donald Trump is re-elected in the upcoming November U.S. election, it could hurt the economy. Realizing his main policy principles, such as America First and anti-environmental policies, could increase uncertainty in the relationship between the two countries.
According to major Korean economic research institutions on the 28th, it won’t be easy to entirely scrap the Inflation Reduction Act (IRA) if the second Trump administration comes into power. Still, there is a high possibility of significantly changing the subsidy policy. The IRA, aimed at addressing climate change, includes provisions to provide subsidies (tax benefits) to electric vehicles finally assembled in North America.
Kang Goo Sang, head of the North America and Europe team at the Korea Institute for International Economic Policy (KIEP), said, “If the revision of the IRA is realized, the sales of the three Korean battery companies that have entered the U.S. in the form of joint ventures could be initially damaged,” adding that “companies that have entered with the three battery companies could also be secondarily damaged.”
Trump’s retreat from carbon neutrality could also delay global efforts toward carbon neutrality. Ju Hyun, head of the Industrial Research Institute, said, “As a business, we have to be extremely cautious.” He added, “There are also forecasts that global demand for electric vehicles may not increase this year compared to last year,” and “Not only for additional investment related to secondary batteries but also for the execution of existing investment plans need extreme caution.”
Ju Won, head of the Economic Research Department at the Hyundai Economic Research Institute, also said, “Especially the eco-friendly car industry will be in a slump,” adding, “Since the U.S. is currently leading the automobile market, there is also a possibility that the automobile industry itself will deteriorate.”
The fact that it is known to pursue a method of raising the current tariff rate on foreign products by 10 percentage points is also a burden on our economy. Director Ju said, “In a situation where we are trying to incapacitate the World Trade Organization (WTO) and re-sign the Free Trade Agreement (FTA), Korea’s trade surplus is increasing, so not only China but also our country could be a target.” South Korea had a trade surplus of $44.5 billion with the U.S. last year.
There are also voices of concern about economic damage due to security issues. Song Young-kwan, a senior researcher at the Korea Development Institute (KDI), said, “Trump had previously demanded a six-fold increase in the cost of stationing U.S. troops in Korea,” adding, “I am worried about whether we can respond in the current tax situation if it is raised again.”
He continued, “If Trump recognizes Taiwan’s independence, there is also a possibility of friction between China and Taiwan,” and “In this case, South Korea’s Gross Domestic Product (GDP) could be reduced by a third.”
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