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Biden’s Climate Policies Upset Top Ally

Biden's tax credits for electric vehicles damage South Korean auto makers

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• September 28, 2022 4:00 pm

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President Joe Biden's recent incentive for Americans to buy electric vehicles hurts South Korea's auto industry, upsetting one of America's top allies, the Wall Street Journal reported.

In May, South Korean auto maker Hyundai Motor Group, parent company of Hyundai Motor Co. and Kia Corp., pledged to invest $5.5 billion in U.S. electric vehicles. Biden visited Seoul that month, promising the heads of the company, "I will not let you down." But in August, Biden signed the Inflation Reduction Act, which includes a $7,500 tax credit to customers who buy EVs assembled in America, representing a devastating blow to foreign EV manufacturers.

Biden promised Americans he would "restore America's standing in the world," yet South Korea is not the first ally Biden has managed to upset while president. Last year, Biden infuriated France for sabotaging the country's $66 billion submarine deal with Australia by making his own deal to help Australia develop a nuclear-powered submarine. France responded by recalling its American ambassadors, a first in the French-American alliance.

Hyundai and Kia, which currently assemble their EVs in South Korea, complained that Biden's new stipulation does not provide a "level playing field for customers and workers." Senior officials from Seoul have come to Washington in recent weeks to express their dissatisfaction. South Koreans' frustration with Biden's massive climate and tax bill, which many critics at home argue will do nothing to reduce inflation, highlights the Biden administration's struggle to maintain both its domestic agenda and foreign alliances.

"There is a mismatch between Biden’s domestic agenda and foreign policy in terms of trying to promote supply-chain cooperation and coordinating with allies on critical emerging technologies," Andrew Yeo, an expert on South Korean issues, told the Journal. "What it comes down to fundamentally is an issue of trust for South Korea."

"The public is shocked, dismayed, disappointed," said Kim Byoung-joo, a policy adviser to former South Korean trade ministers. "The U.S. government has to do something about it. They can’t just sit there."

On Tuesday, Vice President Kamala Harris spoke to South Korea's prime minister in Tokyo about the concerns. She promised the United States would consult its allies in the future.

South Korea has provided 35,000 jobs for Americans so far this year, largely driven by EV investments, according to Reshoring Initiative. South Korean media report that Kia plans to start assembling EVs in the United States in 2024 in order to stay competitive in the market.