Korean businesses worry over risk rising from U.S. presidential election

There is a growing concern among South Korean businesses investing heavily in the U.S. market as the race for the U.S. presidential election, just two months away, is getting so competitive that it is hard to predict who will win. After all, it seems uncertain that the U.S. government would keep its promise given that the Republic Party and the Democratic Party show a great contrast in economic policy. Moreover, there is a growing likelihood that international investors, including South Korean companies, will be put at a disadvantage, for example, with fewer grants to be provided considering the growing trends of America-first and populist views shared by both parties throughout the presidential race.

Since U.S. President Joe Biden took office in 2021, South Korean companies have made a great investment in the U.S. market with the CHIPS Act and Inflation Reduction Act of 2022 in mind. The top four South Korean conglomerates have pledged to contribute as much as 104.2 trillion won in total in recent years. However, their investment plans have been put on hold or pushed back since uncertainty over U.S. politics only grew as Washington postponed grant programs and Republic Party presidential candidate Donald Trump pledged to repeal the IRA. Samsung Electronics has recently moved back its original plan of running foundry facilities for mass production in Taylor, Texas, in the second half of this year to after 2026. Likewise, SK-On and LG Energy Solution have been left under conditions of reduced visibility in operating U.S.-based battery factories currently under construction.

Moreover, the growing “America-first” movement increases concerns in the run-up to the U.S. presidential election. For instance, Nippon Steel’s deal to acquire U.S. Steel is on the brink of failing, showing an example of economic decisions being affected by politics before the election. The Nippon purchase deal has been met with opposition from Trump and Democratic Party candidate Kamala Harris, both driven by America Firstism and seeking to win over the hearts of Rust Belt voters. South Korean companies may have every reason to feel anxious and frustrated as even Japan – one of the closest U.S. allies – is treated as an unwelcome investor.

Uncertainty over policy decisions leaves business investors more worried than anything else does. Although both parties share America Firstism, they take a different economic policy viewpoint. If Trump wins, tax credit programs will likely go down the drain despite Washington’s promise made earlier, given that he wants to discard the IRA and electric vehicle mandates. Even if Harris is elected, there is no guarantee that she will inherit Biden’s initiatives. She has recently declared that she goes against the EV mandates.

Global businesses in the U.S. market are working nimbly to appeal to both the Republic and Democratic parties using every communication channel, considering that greater uncertainties and investment risks will follow the U.S. presidential election. However, there is only so much they can do on their own. The Japanese government has proactively double-checked action plans for economic matters and security across government agencies. Likewise, the South Korean government should cooperate closely with industries to tailor strategies to sectors and businesses.