[The Editors' Verdict] U.S. Investment Must Also Weigh the Value of Votes

Companies are paying close attention to changes in the U.S. presidential election landscape because astronomical amounts of money are at stake. Over the past four years, they have increased investments in electric vehicles and renewable energy in line with the Democratic Party's pro-environment policies, but as the election season approaches, it has become difficult to predict the future. With approval ratings remaining tight, it is extremely challenging to devise investment strategies. There are also concerns that if the administration changes, the Inflation Reduction Act (IRA) could be revised, making it harder to receive investment subsidies.

The prevailing sentiment has certainly been that postponing major investments is the best course of action. Cho Seok, CEO of HD Hyundai Electric, recently stated at the Energy Trade Forum held at Trade Tower in Samseong-dong, Seoul, "We plan to make investment decisions after seeing the results of the U.S. presidential election," acknowledging the difficulty of timing decisions. Although Cho emphasized that this was "about our company," many business leaders share this view.

Looking at the recent U.S. election dynamics, the dilemma over whether to invest seems to be nearing a conclusion. With evaluations that former President Donald Trump, the Republican presidential candidate, has gained momentum following the shooting incident, the time to make investment decisions is approaching faster than expected.

Changes in investment items are inevitable. According to statements Trump recently made to local media ahead of the official nomination at the party convention, the direction of corporate investments appears to be set. He pointed out, "You can't make 100% of cars electric. But they are giving out huge amounts of subsidies." Regarding the IRA, he criticized, "It didn't lower inflation; it raised it," and concerning wind and solar power supported by the IRA, he emphasized, "We need affordable energy." This suggests a possibility of reducing subsidies and placing more emphasis on fossil fuels and nuclear power rather than renewable energy. In short, it points in the exact opposite direction of the current Democratic administration.

If a second Trump administration takes office, high barriers will be erected in trade between countries. He has formalized the weaponization of tariffs. Recently, former President Trump declared, "I will impose a 10% tariff on all imports from every country." This means that the local prices of our main export items to the U.S., such as automobiles and steel, will be at least 10% higher. Robert Lighthizer, who served as the U.S. Trade Representative during Trump's administration, wrote in his book No Free Trade that tariffs are "worth utilizing given the U.S. market conditions." The era of global prosperity through free trade by lowering trade barriers is coming to an end.

The weaponization of tariffs also promotes investment in the U.S. Tariffs are a sensitive issue for us, a country that relies heavily on trade. A universal 10% tariff is more likely to be applied to countries like ours with a large trade surplus with the U.S. Under the Biden administration, South Korea's trade surplus with the U.S. has exceeded $140 billion, more than doubling compared to the Trump era. Pyo In-su, a trade expert and attorney at Pacific Law Firm, said, "From the U.S. perspective, considering the deficit with South Korea, it is highly likely that tariffs will be imposed as a representative measure."

Whether Japan's Shin Nippon Steel acquires US Steel could also affect South Korea's steel investment in the U.S. An industry expert said, "If Shin Nippon Steel produces and supplies in the U.S. rather than in a third country, it could impact the global industry landscape."

The reasons for investing in the U.S. are already overwhelming. The question is 'where to invest.' There are reasons why Texas and Georgia are emerging as hotspots. Now, the value of votes is expected to become an important indicator for investment.