Despite changes in congressional power dynamics following the U.S. midterm elections, forecasts indicate that trade pressure on South Korean companies will persist. With various means of pressure, including tariffs, investment commitments, and industry-specific regulations, both the government and businesses need to reassess their response strategies.
The Korea Chamber of Commerce and Industry (KCCI) identified tariffs, investment, and legislation as the three key variables in future U.S. trade policy in a report released on November 11. It is anticipated that the U.S. will continue its policy of encouraging domestic production and investment, necessitating a comprehensive strategy beyond individual issues.
In the area of tariffs, it is expected that pressure will continue through the use of Section 301 of the Trade Act and Section 232 of the Trade Expansion Act. In March, the U.S. initiated a Section 301 investigation into structural overproduction, targeting 16 economies, including South Korea. The investigation includes 21 manufacturing sectors, such as steel, chemicals, automobiles, batteries, semiconductors, and shipbuilding.
KCCI explained that South Korea's response should vary at each stage of the investigation, negotiation, and implementation. During the investigation phase, it should present arguments based on the contributions of South Korean intermediate goods and equipment to U.S. manufacturing. In the negotiation phase, it should clarify conditions for exceptions and reductions linked to local investment. In the implementation phase, it should meticulously verify customs guidelines, including product classification, country of origin, effective dates, and any existing tariff overlaps.
Regarding investment in the U.S., it is anticipated that the dual pressures of the administration's demand for 'early execution' and Congress's focus on 'performance verification' will increase. The U.S. administration is pushing for the swift fulfillment of investment commitments, while the new Congress, led by the Democratic Party, may strengthen verification of local job creation and supply chain contributions.
In fact, the FIRM Act, introduced by Democratic lawmakers in June, includes provisions for establishing an independent body to oversee foreign companies' compliance with investment commitments and their contributions to local economies. This legislation also references South Korea's $350 billion investment agreement with the U.S.
In response, KCCI emphasized that companies should reassess their strategic investment priorities and proactively propose projects that leverage their strengths, considering the selection process, recovery structure, and operational opportunities for South Korean firms.
The importance of monitoring legislative trends in Congress and expanding communication channels was also highlighted. Notably, discussions in the year-end National Defense Authorization Act (NDAA) regarding exceptions for shipbuilding restrictions, export controls on advanced semiconductors and manufacturing equipment, and procurement standards for critical minerals, robotics, and solar energy could directly impact South Korea's key industries' access to the U.S. market and contracts.
Currently, the Democratic Party is discussing measures to strengthen congressional oversight of tariff imposition. However, it typically requires 60 votes to end debate on general legislation in the Senate, and a two-thirds majority of present and voting members in both chambers is needed to override a presidential veto. Therefore, the actual establishment of tariff control legislation may prove challenging.
Accordingly, KCCI suggested that the existing administration-centered communication network with the U.S. should be expanded to include key congressional committees and state governments where investments are made. Collaboration with state governments, which hold significant authority over production facility and data center approvals, is expected to become increasingly important.
Lee Si-wook, head of KCCI's economic research division, stated, "Post-midterm election trade responses should focus not on passively waiting for a policy shift but on negotiations that protect interests, strategic investments, and expanded cooperation channels. South Korean companies need to specify which projects they will participate in, under what conditions, and how they will recover investment returns, linking U.S. investments to tangible opportunities for domestic industries and partners."
* This article has been translated by AI.
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