
US President Donald Trump wasted no time on his first day back in the White House, signing a flurry of executive orders on Monday aimed at achieving his vision to “put America first.”
The sweeping actions included rescinding nearly 80 Biden-era policies and addressing issues such as immigration, climate change and gender. These orders, while centered on US domestic policy, could also have huge implications for South Korean businesses.
What is an executive order?
An executive order is a directive issued by the president that is legally binding but does not require congressional approval. Although the US Congress cannot directly overturn these orders, it can prevent them from being carried out by cutting funding or creating other obstacles. Executive orders can also be challenged in court if they are deemed unconstitutional or thought to exceed presidential authority.
Incoming US presidents often use executive orders to lay out policy changes and can cancel their predecessors' executive orders. By setting the administration’s priorities, these orders can also pressure Congress to act.
During his first term, Trump signed 220 executive orders, compared to 162 by Biden.
EV, battery industries at stake?
One of Trump’s many contentious actions was scrapping the Biden administration’s electric vehicle mandate, which aimed at making half of all new vehicles sold in the US electric by 2030.
This move, part of the broader “Unleashing American Energy” order, seeks to eliminate what Trump calls “unfair subsidies” favoring EVs. He also ordered an immediate halt to funds allocated under the Inflation Reduction Act and Infrastructure Investment and Jobs Act, which included funds earmarked for EV charging stations.
Details are not yet clear, but observers say Trump is taking aim at the IRA’s $7,500 subsidy to consumers of US-produced EVs.
Hyundai Motor, which has invested $7.6 billion in a new EV plant in Georgia, could see its strategy upended.
Likewise, battery giants LG Energy Solution, Samsung SDI and SK On face significant challenges, as they have committed to building manufacturing facilities in the US to capitalize on the tax incentives.
Without these incentives, profit margins could be slashed, especially as the industry grapples with the declining prices of batteries and slower-than-expected consumer uptake of EVs.
Amid rising concerns, industry watchers say completely nullifying the IRA could be difficult, as it has been enacted already and has support from the Republican-voting states that are the largest beneficiaries of its job creation. But Trump’s clear departure from pro-EV policies could dampen the industry outlook as a whole.
“It can be seen that the president, as the head of the executive branch, is ordering the priorities of the government, but an outright repeal or invalidation of an already enacted law through an executive order is fundamentally impossible,” said Ahn Hoe-soo, a research analyst at DB Financial Investment.
She added that the Trump administration could further tighten subsidy qualifications or expand the definition of "foreign entities of concern," but a complete nullification of the IRA is practically off the table.
Renegotiation of Korea-US trade deal?
Trump also signed a memorandum titled “America First Trade Policy,” directing his Commerce and Treasury departments to investigate the US’ “large and persistent” annual trade deficits. He called for a review of existing US trade agreements to seek “reciprocal and mutually advantageous” concessions with respect to free trade partners.
Here, all eyes are on whether Korea, which runs a trade surplus of $51.4 billion with the US, could be a target for potential renegotiation.
“When Trump said trade deals, it applies to all the free trade deals, including with South Korea,” said Cho Seong-dae, director of trade studies and cooperation at the Korea International Trade Association. “He also mentioned trade balance and it appears the Korea-US FTA will also be under review.”
Agencies have until April 1 to report their findings and recommendations, after which the Trump administration will decide on revising free trade agreements.
In his first term, Trump extended a 25 percent import tariff on South Korean pickup trucks until 2041, following a renegotiation of the bilateral trade deal.
Analysts suggest that if the negotiations concerning the trade deal are on the table, the auto sector, which significantly contributes to the US trade deficit, could be a focal point.
Looming tariffs
In the executive action addressing “unbalanced trade,” Trump instructed agencies to recommend appropriate measures, such as tariffs, to reduce trade deficits. Trump also pitched the creation of a new agency called the External Revenue Service to collect tariffs.
“Instead of taxing our citizens to enrich other countries, we will tariff and tax foreign countries to enrich our citizens,” Trump said in his inaugural address. Despite the president's characterization, tariffs are paid by the importer on the American side, with price increases often passed on to consumers.
While Trump did not specify tariffs in his executive order, he hinted at imposing a 25 percent tariff on Mexico and Canada starting Feb. 1, along with a 10 percent tariff on China the same day.
Although a blanket tariff of 10-20 percent on all imports is not imminent, its potential introduction creates uncertainty for South Korea, which relies heavily on exports to the US for products like cars, electronics and semiconductors.
The prospect of tariffs on China and Mexico also poses a concern for Korean companies with manufacturing operations in these countries, potentially raising costs.