US President-elect Joe Biden. (Yonhap)
As the United States is set to inaugurate Joe Biden as president this week, South Korea’s economy is expected to gain momentum from the upcoming US administration’s pump-priming programs and trade multilateralism, phasing out the uncertainties under Donald Trump.
But the enhanced environment-related regulations may pose challenges to Korean companies and the persisting US-China trade conflict will continue to weigh upon Korea’s trade-reliant economy, according to market observers.
“Bidenomics will boost the US’ economic growth pace and expand the global trade volume, consequently delivering a positive impact to the Korean economy,” said Hyundai Economic Research Institute in its recent report on key features and implications of the so-called “Bidenomics.”
The think tank speculated that the inauguration of the new US chief will add another 0.1-0.4 percentage point growth to Asia’s fourth-largest economy this year and 0.6-2.2 percentage point to its exports.
The economic pillars of the US President-elect is marked by its fiscal stimulus program, as well as the restoration of return multilateralism.
The first visible action came last Thursday as Biden unveiled a fiscal proposal worth $1.9 trillion to jumpstart the economy amid the COVID-19 pandemic fallout and to help minority communities.
Also, while the world‘s largest economy is set out to make expansive moves, it is the ecofriendly industrial sectors that are likely to enjoy exceptional benefits in the upcoming years.
Having swelled the ranks and size of his climate policy team, Biden is expected to sign on his first day an executive order to rejoin the Paris Climate Agreement -- which predecessor Trump stepped away from.
The US economy’s green move largely comes in line with Korea’s own Green New Deal program, which has been adding fresh fuel to battery electric vehicles and renewable energy businesses.
For instance, Hyundai Motor Group is renewing its pledge to introduce up to 10 ecofriendly vehicle models in the US market by 2022. It is also working to expand the exports of hydrogen full cell trucks.
Battery maker LG Energy Solution is currently developing a new energy-efficient car battery that may cover 1,000 kilometers in a single charge, while expanding its battery supplies to BEV market champion Tesla.
Renewable energy or energy storage system developers are also seen to be riding on Biden’s vow to establish some 8 million photovoltaic roofs, 500 million solar power panels, and 60,000 wind turbines by 2035.
Despite the overall momentum, however, the persisting US-China conflict and enhanced corporate regulations will act as downside risks for Korean companies, according to market observers.
“There is a high possibility that the US-China tension will remain permanent under the Biden administration as well,” the Bank of Korea said in its recent report.
In a separate report, Seoul’s central bank pointed out that the Korean economy has advanced in the global value chain since the global financial crisis but also has grown its trade dependency on neighboring China during those years.
“Should the US and China continue to conflict on the trade fronts, Korea will likely face challenges, especially in its exports to China,” said Seoul National University economist Kim So-young.
Though Biden is largely seen as leaning back to multilateralism, his “Buy American” policies to offer incentives to US manufacturing involves some protectionist factors that may pose burden upon Korean exporters, according to the state-run Korea Trade-Investment Promotion Agency.
Also, should the US introduce a carbon tax as Biden has mentioned, Korea’s petrochemicals, steel, and semiconductors are expected to be impacted, KOTRA added.
Korea is currently working on drafting its own carbon tax plan in line with the Green New Deal, but is making slow progress. As the related research and service is slated to kick off in the second quarter at the earliest, according to the Ministry of Economy and Finance, it is likely that the corresponding regulations may not take shape in time for the tax law revision for next year.
By Bae Hyun-jung (firstname.lastname@example.org