The U.S. auto and battery industries are on high alert following Donald Trump’s nomination as the Republican candidate for the U.S. presidential race on Wednesday.
Concerns are mounting that a second Trump administration’s tariff policies could adversely impact South Korean auto battery firms, which heavily depend on exports to the U.S.
The industry is particularly wary of potential changes to the Inflation Reduction Act (IRA) and its subsidy policies implemented under the Biden administration. South Korean companies have made substantial investments in U.S. facilities based on IRA subsidies, and any elimination or reduction of these subsidies would inevitably directly blow their operations.
Trump, who has branded himself as the “Tariff President,” has pledged to impose a universal basic tariff of 10-20% on all imports and a hefty 60% tariff on Chinese imports. Even a modest 10% tariff would result in substantial cost increases for automakers and battery firms, possibly amounting to trillions of dollars. For example, South Korea’s automobile exports to North America totaled $37 billion last year, a trade facilitated by the duty-free benefits for vehicles produced in Korea under the Korea-U.S. Free Trade Agreement (FTA).
While a full repeal of the IRA seems unlikely, reduced electric vehicle (EV) subsidies are possible. In Georgia, Hyundai Motor Group operates a dedicated EV plant, MetaPlant America (HMGMA). Under the IRA, U.S. buyers of domestically produced electric vehicles were eligible for subsidies up to $7,500 per vehicle, but the future of these incentives is now uncertain.
South Korean battery companies, including LG Energy Solution, SK On, and Samsung SDI, are deeply invested in the U.S. market and dependent on IRA subsidies. In the third quarter alone, LG Energy Solution received 448.3 billion won, and SK On received 60.8 billion in Advanced Manufacturing Tax Credits (AMPC). Samsung SDI, which entered the U.S. market later, is expected to expand its AMPC scale starting next year.
However, most experts believe a complete repeal of the IRA would be challenging, as it requires congressional approval, and most federal lawmakers associated with IRA beneficiary states are Republicans. Analyst Joo Min Woo of NH Investment & Securities pointed out that Trump failed to repeal Obamacare during his first term. However, if repealing the IRA proves difficult, Trump could use executive orders to tighten conditions for subsidies or tax credits, effectively reducing the budget.
Experts stress the need for swift action under Trump’s presidency. Jo Cheol, a senior researcher at the Korea Institute for Industrial Economics and Trade, advises companies to consider alternatives. “We need to refocus on areas like plug-in hybrids, which have seen waning domestic interest. The battery industry should also explore ways to stimulate demand in sectors beyond electric vehicles, such as energy storage systems (ESS) and ships,” Jo said.
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