Crisis and Opportunity Coexist: K-Industry to Be Shaken by New White House Owner [2024 US Election]

Lee Jae-yong, Choi Tae-won, and Other Group Leaders' Consecutive US Trips
Uncertain Outlook for Chips Act if Trump Returns
Expecting Benefits from Policies to Curb China's Influence
Increased Local Labor Costs Due to Worker Protection Promises
Positive for Auto Industry... Battery and Steel Face Challenges

The new White House occupant in the United States will be decided on the 5th of next month. Depending on who wins the presidential election, industrial and trade strategies and various sectors are expected to experience mixed fortunes. Our companies are also likely to respond more quickly.

Our business community and corporate leaders have been monitoring the U.S. presidential election trends and seeking response strategies. Economic organizations such as the Korea International Trade Association and the Korea Chamber of Commerce and Industry have invited key U.S. figures to Korea to hear their insights and have also met them in the U.S. Corporate leaders like Lee Jae-yong (Samsung), Chey Tae-won (SK), and Koo Kwang-mo (LG) have taken time to travel to the U.S. and met with American officials whenever possible domestically. Since the Democratic candidate was replaced by Vice President Kamala Harris at the end of July, and with her high approval ratings leading to a fiercely unpredictable election competition against former President Donald Trump (Republican), these efforts have intensified.

Whoever holds the U.S. presidency is closely tied to the survival of our companies. Semiconductors have emerged as a key task in conquering the U.S. market, the main stage of the artificial intelligence (AI) era, and the automotive sector, transitioning to electric vehicles, shows a similar trend. Recently, the scale of exports from our companies to the U.S. has significantly increased, and the U.S. has emerged as a core market influencing our economy. According to the Ministry of Trade, Industry and Energy, exports to the U.S. from January to May amounted to $53.3 billion, surpassing exports to China. If this trend continues, exports to the U.S. are expected to surpass exports to China by the end of this year for the first time in 22 years since 2002.

The market is rapidly reorganizing to the extent that failure to capture the U.S. market could lead to being left behind on the global stage. The U.S. grants the president enormous authority by law to directly influence trade. The Trade Act Section 301, often called a ‘super’ trade law, is a prime example. If a trading partner’s unfair practices harm U.S. industries, the president can impose trade retaliation. Therefore, our industries can be greatly affected depending on who the U.S. president is.

While there are both hopes and concerns across industries, there is a call to carefully analyze each candidate’s pledges and increase predictability of policies so that rapid responses can be made once the new government takes office. Jeong Eun-mi, senior research fellow at the Korea Institute for Industrial Economics & Trade, emphasized, "Regardless of which candidate wins the U.S. presidential election, a tailored strategy for the revitalization of our economy and industrial competitiveness must be established, and an action plan should be activated immediately after the election."

Semiconductors: Crisis and Opportunity Coexist

The item most sensitive to the U.S. presidential election is semiconductors. According to the monthly ‘Trade Brief’ published by the Korea International Trade Association and the October report ‘Impact of U.S. Presidential Election Scenarios on Korean Industry and Response Directions’ by the Korea Institute for Industrial Economics & Trade, semiconductors are considered the sector most likely to change significantly depending on who the new president is. Both Korea and the U.S. have recently focused on semiconductors as a cutting-edge core business and are investing heavily. Whether the current administration’s ‘CHIPS Act’ will be maintained is a major concern. The U.S. government provides substantial subsidies and tax benefits to foreign companies under this law. Samsung Electronics has been approved for $6.4 billion (about 9 trillion won), and SK Hynix for $450 million (about 620 billion won) in subsidies. They are also expected to receive loan support and various tax benefits. This is possible only if Harris is elected and the law is maintained as is. If Trump wins, the future of the CHIPS Act and subsidies for our companies will become uncertain. However, Trump is expected to strengthen measures to curb China’s influence in the semiconductor supply chain, which could bring some indirect benefits.

Both candidates have pledged to raise wages and protect the rights of American workers to secure their support base, which could increase labor costs for our semiconductor companies operating factories in the U.S.

Electric Vehicles Show Strong Performance; Battery Market Unpredictable

Our automotive industry, which depends on the U.S. for 47.3% of its exports, is expected to maintain a positive trend regardless of who wins. Only detailed conditions are expected to differ. If Harris takes office, it is widely believed that the current administration’s policy of expanding electric vehicles will continue, benefiting our companies’ electric vehicle exports. The continuation of electric vehicle tax credits under the Inflation Reduction Act (IRA) is also positive for our automotive industry. Experts also foresee stable medium- to long-term exports of internal combustion engine vehicles.

If Trump returns to power, he is expected to repeal the IRA and reduce support for electric vehicles, forcing our companies planning to shift to electric vehicles to revise their strategies. Although there will be burdens such as adjusting production facility investments and repurposing electric vehicle plants during this transition, sales of internal combustion and hybrid vehicles are expected to increase, so experts believe there will be no significant negative impact on our companies. In fact, import policies excluding China may be stronger under Trump than Harris, potentially benefiting our companies. However, if Trump is elected, there is concern that he may attempt to reduce the sharply increased exports of our vehicles to the U.S. during the Biden administration.

The battery sector is closely linked to the electric vehicle business. If our electric vehicles sell well, the batteries that power them are likely to be predominantly our products. The battery market is expected to be more favorable under Harris. However, there remains the challenge of responding swiftly to the ongoing expansion of eco-friendly energy and climate change policies maintained by the current administration. If Trump repeals the IRA and shrinks the electric vehicle market, the battery market could be severely shaken, causing difficulties for our companies. Some argue that since Elon Musk, owner of electric vehicle maker Tesla, has declared support for former President Trump, electric vehicles may also be a focus of development under Trump.

Steel Industry Prefers to Avoid Trump

The steel and petrochemical sectors generally prefer Harris over Trump. In particular, our steel companies reportedly want to avoid Trump due to the difficulties they faced from his unreasonable high tariff policies during his first term. During his first administration, Trump imposed general tariffs of 25% on steel and 10% on aluminum imports under Section 232 of the Trade Expansion Act, citing national security. It is expected that Trump would maintain this stance if re-elected. To meet the expectations of many workers in the steel industry, he is likely to impose high tariffs on imported steel entering the U.S. Even if Harris is elected, concerns remain. Harris has expressed intentions to strengthen policies addressing climate change and is expected to resume negotiations for the ‘Global Sustainable Steel Agreement (GSSA),’ which had been temporarily suspended, and there is a possibility of introducing carbon trade barriers.