Need to Secure Funds to Fulfill Tax Cut Pledge
Trump Ally Musk Supports Abolishing Subsidies
Korean Companies Increasing US Investment Face Inevitable Impact
The transition team of President-elect Donald Trump is reportedly planning to abolish the maximum $7,500 (approximately 10.5 million KRW) subsidy provided for electric vehicle purchases under the Inflation Reduction Act (IRA). The implementation of the IRA, which offers tax credit benefits for cars and batteries produced in the United States, is expected to deal a blow to Korean companies that have significantly increased their investments in the U.S. market.
On the 14th (local time), major foreign media outlets cited multiple sources reporting that Trump’s transition team is discussing such plans. The energy policy team, led by Harold Hamm, founder of the oil and gas company Continental Resources, and Doug Burgum, Governor of North Dakota, is spearheading the discussions. They reportedly held several meetings at the Mar-a-Lago Club in Florida, where Trump’s residence is located, since the election on the 5th.
According to sources, the transition team believes that to secure the necessary funds to fulfill Trump’s tax cut promises, budget savings through the abolition of electric vehicle tax credits are essential. In particular, they anticipate that extending the tax reduction law, which is set to expire in early 2025 during the early phase of Trump’s term, and including the elimination of electric vehicle subsidies as part of tax reform, will garner broad support from Republican lawmakers.
Elon Musk, a close associate of Trump and nominated to head the Office of Government Efficiency in the new administration, whose company Tesla is a leading electric vehicle manufacturer, reportedly expressed support for the transition team’s plan to abolish electric vehicle subsidies. Previously, Musk mentioned that while Tesla might suffer some setbacks in electric vehicle sales if the IRA subsidies were removed, competitors like General Motors (GM) would face much more severe damage, ultimately benefiting Tesla in the long run.
Caroline Ribbit, spokesperson for Trump’s transition team, stated regarding this matter, "The American people overwhelmingly re-elected President Trump," adding, "They have authorized him to fulfill the promises he made during the campaign, and Trump will deliver on them."
During his campaign, Trump referred to the IRA as the "Green New Scam," signaling his intention to increase crude oil production while eliminating subsidies for clean energy such as electric vehicles, wind and solar power, and large-scale hydrogen production.
Scott Bessent, a billionaire fund manager and a leading candidate for Treasury Secretary in Trump’s second administration, also advocated for reforming the IRA. In an article published on the 10th in the U.S. economic daily The Wall Street Journal (WSJ), he stated, "The distorted incentives of the IRA that encourage unproductive investments must be reformed," emphasizing that "private capital allocation, not government intervention, is crucial for growth."
If the electric vehicle subsidies under the IRA are abolished during Trump’s second term, the already slowing electric vehicle market is expected to take a direct hit. Korean companies, which have expanded their investments in the U.S. by establishing factories to qualify for subsidy benefits under the IRA, are also likely to suffer significant damage. Korean firms greatly increased their investments in strategic industries such as semiconductors, electric vehicles, automobiles, and batteries in the U.S. following the implementation of the IRA and the CHIPS and Science Act (CSA) in 2022, becoming the largest investor in the U.S. with an investment scale of $21.5 billion (approximately 30.23 trillion KRW) as of last year.
Some analysts believe that certain parts of the IRA policies will be difficult to repeal. Trump’s transition team’s energy policy group recognizes that some clean energy subsidies under the IRA have already been disbursed and that these programs are popular in Republican-leaning areas, making complete withdrawal challenging.
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