With the August 1 deadline for South Korea to strike a new trade deal with the United States rapidly approaching, Seoul’s focus has been on minimizing the potential for significant tariff increases on Korean exports to the United States. However, shifts in regulatory and subsidy policy under the Trump administration are also negatively impacting Korean investments in the United States and should be a part of any negotiations.
Over the last three years, Korean firms have invested $114 billion in the United States. Centered in strategic areas such as semiconductors and clean energy, these are significant investments in U.S. manufacturing capacity. However, the Trump administration’s turn against clean energy and related products has decreased the long-term potential of much of this investment.
Ironically, these regulatory shifts come at a time when Washington is reportedly pushing South Korea to create an outward investment fund to support manufacturing in the United States that could run into the hundreds of billions of dollars. In essence, Trump administration policy is devaluing current Korean investment, while demanding additional investment in the United States to avoid tariffs of 25 percent or more on Korean exports to the United States.
In some cases, these policies seemingly undermine Trump administration objectives. Restoring manufacturing to the United States has long been a priority for Donald Trump and has been touted by his administration. The administration has launched a wide range of Section 232 national security investigations focused on the impact of imports on domestic manufacturing and national security, presumably with the intention of addressing the decline in manufacturing in the United States through higher tariffs to incentivize domestic production.
The Trump administration has also made restoring U.S.energy dominance as a key goal for the administration but has sent conflicting signals. It initiated a Section 232 investigation into polysilicon, which is used in semiconductors and solar panels. A separate Section 232 investigation into semiconductors already covers some of the uses of polysilicon in semiconductor manufacturing, suggesting that the separate polysilicon investigation relates primarily to its usage in solar panels.
Expanding solar power as part of an energy security agenda would also support the administration’s objective of maintaining the United States’ dominance in AI. This will require significant new amounts of electricity production, with the International Energy Agency expecting AI data centers to account for half of the growth in electricity demand in the United States by 2030.
Nominally, the Trump administration’s Section 232 investigation into polysilicon imports should be beneficial to Hanwha Q Cells, a Korean firm that manufactures solar panels in the United States. According to the International Energy Agency, China accounts for 93 percent of global manufacturing of polysilicon, making U.S. manufacturers dependent on Chinese sources of polysilicon for the production of solar panels.
Hanwha Q Cells is investing $2.5 billion to develop the sole U.S.-sourced supply chain for the production of solar panels in the United States, but has struggled to ease its dependence on China for polysilicon. OCI, another Korean solar manufacturer, is also working to develop a non-China solar power supply chain in the United States utilizing polysilicon from its facilities in Malaysia.
While the Section 232 investigation should help Hanwha Q Cells by incentivizing polysilicon production in the United States, there are more significant countervailing forces in U.S. policy that will negatively impact those investments. The Trump administration has introduced a new policy requiring a political review of new solar projects in the United States. Rather than being reviewed by lower-level staff, 68 different actions by the Department of Interior for the deployment of solar panels will now need to be personally approved by Secretary Doug Burgum. Because even projects not on federal land consult with the Interior Department to determine if their projects require permits or are in compliance with federal laws, this new policy has the potential to significantly slow the deployment of solar power in the United States.
The One Big Beautiful Bill also moved forward the phase out of solar power subsidies to require construction to begin by July 4 of next year or power to be produced by the end of 2027. The subsidies were originally scheduled to be in place until 2028.
Hanwha Q Cells and OCI are not the only Korean firms facing increasing pressure due to policy changes from the Trump administration. Over the last three years, about half of Korean investment into the United States has been in the EV battery sector. Those investments created over 20,000 U.S. manufacturing jobs. Yet these EV battery firms were already under financial pressure even before the removal of the Inflation Reduction Act’s $7,500 tax credit under the One Big Beautiful Bill.
The financial pressure on Korean EV battery makers will increase with the slowing growth in demand for EVs following the removal of the consumer tax credit. This decline will also impact Hyundai, which just invested $12.6 billion to build its new Metaplant in Georgia to produce 500,000 EVs and hybrid vehicles per year across all of its brands.
The regulatory shifts under the Trump administration will only add to the increasing cost pressures manufacturers face from the various Section 232 and anti-dumping investigations on commodities, which will drive up the cost of producing goods in the United States. The proposed 50 percent tariff on copper will increase costs for producers of semiconductors, EVs, and consumer electronics. A new 93.5 percent anti-dumping tariff on graphite, a key material for making EV batteries, will also increase the costs of EV batteries. With reductions in subsidies and increasing regulatory barriers for these industries, production costs will increase will demand for their products will decline.
Trump promised a low regulatory environment to boost manufacturing in the United States and to help compensate companies for the new tariffs. That low regulatory environment to date only applies to industries favored by the Trump administration; in other sectors, new policies actually undermine existing manufacturing investments in the United States. Any new trade deal between the United States and South Korea needs to address the negative impact of policy changes on Korean firms to protect US manufacturing and encourage further Korean investment in the United States.
