Yoon, Biden Leave Protectionist Conflict Unresolved

President Yoon Suk-yeol and his U.S. counterpart Joe Biden left conflict between the two countries over drastic U.S. protectionist measures unresolved.

Two laws are in contention -- the Inflation Reduction Act and the CHIPS and Science Act, which blatantly favor North American-made products in an ostensible bid to pull the rug out from under Chinese technology but leaving Korean manufacturers among the casualties.

The withdrawal of tax cuts for electric cars manufactured outside North America and penalties for chipmakers who manufacture in China are burning issues for Korea's main businesses.

But in a joint statement after their summit Wednesday, the two presidents only "committed to continue close consultations with a view to ensuring those Acts encourage mutually beneficial corporate investment in the United States by creating predictable conditions for business activities." 

U.S. consumers who buy Hyundai or Kia EVs are no longer eligible for tax credits because a clause in the IRA bars electric cars using Chinese batteries and those that have not been assembled in North America.

The U.S. government already made a small concession by exempting Korean EVs used for commercial purposes, and giving in any more could prompt Japanese and European carmakers to cry foul.

One staffer at a Korean automaker, said, "We consider the portion of the joint statement as suggesting there is more room to hear our suggestions." 

There is more legroom in the CHIPS and Science Act, which says that Korean chipmakers that receive subsidies for building factories in the U.S. are required to share key manufacturing processes and restrict operations in China. This made Samsung and SK Hynix weary of the risk of revealing their trade secrets.

The U.S. has already made some concessions of the issue of Korean chipmakers' operations in China, but they remain effectively barred from building new semiconductor plants there for the next 10 years or expanding dramatically.

Another issue is limitations imposed by Washington last year on semiconductor equipment exports to China. The U.S. gave Korean companies just a one-year grace period, which expires in October.

Minister of Trade, Industry and Energy Lee Chang-yan on Thursday met with his U.S. counterpart Gina Raimondo and asked the U.S. to address Korea's concerns over the issues.