South Korea’s trade minister will visit the US next month to lobby against President Biden’s new climate and energy tax laws that aim to increase domestic production of electric cars and reduce reliance on China for battery components and materials.
(Bloomberg) — South Korea’s trade minister will visit the US next month to lobby against President Biden’s new climate and energy tax laws that aim to increase domestic production of electric cars and reduce reliance on China for battery components and materials.
“The US seems to be seeking protection of local industries through the Inflation Reduction Act and the Chips Act,” Minister Lee Chang-yang said in a statement Thursday. The legislation contains “details that would put a burden on our companies, raising concerns in South Korea, Germany and Japan, which are also exporting electric cars to the US.”
Lee also said he expected Korean automakers including Hyundai Motor Co. to aim to speed up construction of new plants in the US while Korean battery makers, some of the biggest in the world, may look to increase investments in mines in countries that have free trade agreements with the US, such as Australia and Chile.
The US law requires carmakers to assemble their EVs in North America but Hyundai doesn’t have any operational electric car plants there at the moment. Meanwhile, all three of Korea’s main battery makers — LG Energy Solution Ltd., SK On Co. and Samsung SDI Co. — import most of their critical minerals from China. According to BloombergNEF, more than 50% of the precious metals needed for EV batteries globally are refined from Asia’s largest economy.
Read more: Hyundai and Korean Battery Makers Bristle at Biden Climate Bill
South Korean President Yoon Suk Yeol has pledged to bolster ties with the US since taking office in May, joining NATO meetings and reviving joint military drills. But his decision not to grant House Speaker Nancy Pelosi an in-person meeting earlier this month after she angered China by visiting Taiwan exposed a possible limit to his commitment to deepen South Korea’s alliance with the US.
Yoon has proposed talks on participating in the Biden administration’s Chip 4 alliance to safeguard the supply of semiconductors, after saying he would prioritize South Korea’s national interests. China’s opposition to the move could blow back on the country’s chip makers.
Lee’s US visit will add pressure after South Korea sent a letter to the US Trade Representative earlier this month expressing concerns that the Inflation Reduction Act may breach the US-Korea free trade agreement and World Trade Organization rules. South Korea also plans to talk with European Union member states, particularly Germany, whose transport companies share similar concerns.
Read more: Battery Giants, Hyundai Concerned by US Moves on China Supplies
Korea’s trade ministry added that the Chips Act has a so-called “guardrail” clause that prevents chipmakers from investing in China for the next decade if they receive incentives from the US. Still, Thursday’s statement said the ministry is seeking further negotiations, with the clause indicating some exceptions may be possible.
More stories like this are available on bloomberg.com
©2022 Bloomberg L.P.
