Former President Donald Trump, if successful in reclaiming the presidency in the U.S. elections next November, is expected to completely dismantle the Inflation Reduction Act (IRA), a key policy of ‘Bidenomics’ (Joe Biden + Economics). This could potentially harm global companies, including those in South Korea, that have significantly increased their investments in anticipation of tax and subsidy benefits under the IRA.
According to major foreign media outlets on the 22nd (local time), Trump’s camp announced that if they reclaim power, they will thoroughly review America’s climate and energy policies. Specifically, the plan is to immediately scrutinize the IRA, which includes tax and subsidy benefits amounting to $369 billion (approximately 480 trillion KRW). The new energy policy will focus on deregulating the fossil fuel industry and increasing investments, while retracting subsidies for transitioning to electric vehicles.
A senior official from the Trump camp stated, “We will maximize fossil fuel production,” and added, “The price tag associated with the IRA has been grossly underestimated. We are reviewing massive spending triangles.”
The IRA, introduced last August, is a law that provides substantial tax and subsidy benefits for electric vehicles assembled in North America. It is one of the most significant achievements of President Biden, along with the Semiconductor Support Act (CSA). However, former President Trump has opposed the IRA, calling it “the largest tax increase in history.” He argued that the Biden administration’s renewable energy expansion policy is damaging his own policy aimed at energy independence and rising gasoline prices. In a recent election campaign video, Trump criticized, “American energy is vulnerable, poor, and expensive because it depends on wind power. Wind turbines are rusty, corroded, and kill birds.”
The stark contrast between the two former presidents on the direction of U.S. energy policy is leading to increased policy uncertainty. While President Biden is accelerating carbon neutrality by expanding renewable energy, former President Trump has pledged to deregulate the use of fossil fuels.
The ‘Project 2025’ report by the Heritage Foundation, a U.S. conservative think tank, which serves as a draft of ‘Trump’s second-term pledges,’ includes the dissolution of many institutions needed to carry out Biden’s energy policy, including a loan program office that supports the decarbonization industry with $400 billion (approximately 520 trillion KRW).
If former President Trump is successful in his re-election next year, global electric vehicle and battery companies, including those in South Korea, that have been aggressively expanding their investments in the U.S. in anticipation of IRA benefits, are expected to inevitably suffer. The White House recently announced that since the inauguration of the Biden administration in January 2021, investments from the Asia-Pacific region, facilitated by the enactment of the IRA and CSA, have reached $200 billion (approximately 260 trillion KRW). Particularly, Korean companies’ investments account for at least $55 billion (approximately 72 trillion KRW), over a quarter of the total investments from the Asia-Pacific region.
Currently, the sentiment of Americans leans towards former President Trump, so there is a significant possibility that the tax and subsidy benefits of the IRA may be abolished or drastically reduced. According to a presidential poll released by Emerson College the day before, in a hypothetical head-to-head matchup, former President Trump leads with 47% support, beating President Biden (43%).
However, some argue that it would be realistically difficult for former President Trump to completely dismantle the IRA even if he is successful in his re-election. The argument is that it would be hard to gain congressional approval for the abolition of the IRA, given that the investment and employment effects of the IRA are concentrated in Republican-dominated areas.
Dan Brouillette, who served as the Energy Secretary under the Trump administration, said, “Former President Trump will prove to be much more moderate than some environmental activists fear if he successfully reclaims the presidency.” He added, “The next Republican president will recognize that the positive aspects of the IRA should be maintained.” He also noted, “The IRA includes incentives to continue nuclear power development, which is completely aligned with former President Trump’s policy and is expected to continue.”
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