[Trump Tariff Bomb] ① Carbon Regulation and Hwapyeong Act Identified as 'Trade Barriers'... Pressure for Additional Tariffs Increases

AMCHAM Business Environment Report:
South Korea's Carbon Reduction Goals Exceed Global Standards
Insufficient Infrastructure to Achieve RE100
Excessive Disclosure Demands Under K-REACH

South Korea's corporate-related policies, including carbon emissions and chemical substance regulations, are expected to become targets of the United States' non-tariff barriers. The Donald Trump administration recently announced its intention to impose additional tariffs on non-tariff barriers erected by various countries that hinder the entry of American companies. This puts not only key export items such as automobiles and semiconductors but also other industries like energy and chemicals at risk of facing tariff burdens. However, since the U.S.-highlighted carbon neutrality goals, RE100 (Renewable Energy 100%) policy, and the Act on Registration and Evaluation of Chemicals (K-REACH) are closely linked with domestic circumstances, there are concerns that changing these regulations will not be easy.

According to the '2024 Business Environment Report' released on the 17th by the American Chamber of Commerce in Korea (AMCHAM), American companies pointed out that South Korea's environmental and chemical substance regulations are excessive and that the costs of compliance are high. In particular, carbon emissions regulations and the K-REACH law were cited as major factors weakening the competitiveness of U.S. companies in the Korean market.

South Korea has set a goal to reduce greenhouse gas emissions by 40% by 2030 compared to 2018 levels. AMCHAM stated that this is a "higher level than global standards" and claimed that "American companies are incurring additional costs to comply with the reduction obligations."

AMCHAM also argued that the RE100 policy imposes a significant cost burden. RE100 requires companies to source 100% of their electricity from renewable energy, but due to insufficient renewable energy supply in South Korea, energy purchase costs are high, and the Korea Electric Power Corporation's power grid infrastructure is lacking, making it realistically difficult to achieve the RE100 target.

Greenhouse gas emission regulations are also a burden. South Korea requires automobile manufacturers to sell a certain percentage of electric or low-carbon vehicles, but American car companies have a high proportion of large internal combustion engine vehicles, making it difficult to meet the regulatory standards. Failure to comply could result in additional costs or the need to adjust sales strategies. American companies argue that the Korean government should engage in sufficient discussions with the industry when setting carbon reduction targets.

Chemical substance regulations are also a subject of controversy. U.S. companies pointed out that South Korea's K-REACH is stricter than the European Union's Registration, Evaluation, Authorization, and Restriction of Chemicals (REACH) system and that the requirements for chemical registration and disclosure of corporate confidential information are excessive. The report specifically highlighted issues such as ▲ discrepancies in existing chemical substance lists ▲ mandatory designation of domestic agents for foreign companies ▲ demands for disclosure of corporate confidential information ▲ differences in testing methods for household chemical products.

American companies argue that South Korea should simplify chemical registration procedures to harmonize with global standards and strengthen measures to protect corporate confidentiality. They also emphasized the need to adjust South Korea's testing methods for household chemical products, which are often inconsistent with international standards, to align with global criteria.

AMCHAM stressed that the Korean government should conduct sufficient consultations with the industry when setting environmental and chemical substance regulations and improve policies in a way that harmonizes with global standards. If the U.S. treats South Korea's environmental and chemical regulations as non-tariff barriers and imposes retaliatory tariffs, it could impose a significant burden on Korean export companies.

Shin Won-kyu, a visiting researcher at the Korea Economic Research Institute, analyzed, "The Trump administration is highly likely to consider South Korea's carbon emissions and chemical substance regulations as unfair trade barriers. If regulations in a particular country are judged to restrict market access for American companies, measures such as anti-dumping and countervailing duties will be actively utilized."

Additionally, electric vehicle subsidy policies and platform regulations were cited as burdens for American companies. U.S. companies claim that South Korea's electric vehicle subsidy criteria are set in a way that favors Hyundai and Kia in terms of price, battery performance, and driving range, resulting in additional costs due to subsidy disparities. There are also concerns that the platform regulations being pursued by the Korean government will disadvantage American IT companies such as Google and Apple. In particular, if regulations on large platform operators are strengthened by referencing the EU's 'gatekeeper' concept, market access for American companies could become even more difficult. Some argue that this opportunity should also be used to review and improve regulations. Professor Heo Yoon of Sogang University's Graduate School of International Studies said, "Regardless of U.S. tariff pressures, it is necessary to take a forward-looking approach to re-examine regulations that can be resolved."