Korean economic experts, including heads of economic research institutes under major corporations, identified the weakness of the won as the biggest risk factor for the Korean economy next year. There are also analyses suggesting concerns that domestic corporations could be harmed due to a greater possibility of the Inflation Reduction Act (IRA) in the United States being repealed, which includes subsidies for electric vehicles.
The Korea Chamber of Commerce and Industry held a meeting on the 19th at its headquarters in Jung-gu, Seoul, inviting heads of management and economic research institutes from eight corporations to discuss strategies to overcome the crisis facing the Korean economy due to domestic and external economic uncertainties.
The meeting included Hyun Young-suk, head of the Hyundai Economic Research Institute; Kim Young-min, head of LG Business Research Institute; Kim Gyeon, head of HMG Business Research Institute; An Se-jin, head of Lotte Future Strategy Institute; Kim Won-jun, head of Samsung Global Research; Kim Seong-tae, head of Doosan Business Research Institute; Choi Dong-yong, Deputy Minister of POSCO Business Research Institute; Park Il-jun, vice chairman of the Korea Chamber of Commerce and Industry; Park Yang-soo, head of the SGI at the Korea Chamber of Commerce and Industry; and Seo Jeong-geon, professor of political science and diplomacy at Kyunghee University.
The heads of the research institutes expressed concerns that the rise in exchange rates could pose a serious risk to domestic corporations. Currently, the exchange rate of the won against the dollar has risen to the 1,437 won range. They said, "The weakness of the won could lead to higher import prices, which may further amplify domestic economic sluggishness due to cooling private consumption and a contraction in investment and employment resulting from increased corporate production costs."
Compared to similar past situations, they noted, "In 2016, the external environment was relatively favorable," adding, "During that period, the export improvement effect due to the weakness of the won offset the burden of rising raw material import prices. However, under the recent sharp rise in exchange rates, the volume expansion effect due to falling export prices is likely to decrease compared to the past, increasing the likelihood of worsened corporate profitability."
Seo Jeong-geon, a political expert from the United States and a professor at Kyunghee University, gave a lecture on policy changes in the Trump second administration. He stated, "The Trump administration is expected to push for universal tariffs through executive orders," and noted, "Looking at the example from the Nixon administration, the universal tariffs are likely to be pursued as planned. Furthermore, universal tariffs may be used as a negotiation card to resolve trade deficits in the future."
Regarding the repeal of subsidy policies like the Inflation Reduction Act (IRA) and the CHIPS Act, it was explained that "considering the legislative process, the IRA is more likely to be repealed than the CHIPS Act, which is subject to filibuster that makes its repeal virtually impossible, while the IRA can be passed by simple majority due to budget reconciliation procedures."
He predicted, however, that "the Trump administration prioritizes extending the Tax Cuts and Jobs Act (TCJA), which focuses on corporate tax cuts and deregulations," and expected that discussions on the repeal of the IRA will be postponed according to the rules of procedure in the U.S. Congress until after 2026.
The heads of the research institutes argued that "to prevent damage to the electric vehicle industry, it is necessary to identify the policy demands of related companies and establish a cooperative response system to unify the control tower."
Park Il-jun, vice chairman of the Korea Chamber of Commerce and Industry, said, "To allow corporations to focus on their original activities, the government must pursue predetermined economic policies without wavering and restore external trust by having the National Assembly, government, and business community work together."