With the US presidential election just five months away, the US Congress is stepping up efforts to pass a comprehensive bill to counter China. The 118th US Congress, which convened last year, introduced 376 China-related bills in just nine months, surpassing the 288 bills introduced by the 117th Congress in two years. The push for these bills reflects a bipartisan consensus that it is necessary to strengthen measures against China, particularly in strategic areas such as electric vehicles, shipbuilding, and steel.
On June 9, the Korea International Trade Association (KITA) released a report titled “Trends and Impacts of U.S. Congressional Legislation to Contain China.” The report noted that the number of China-related bills submitted in the 118th U.S. Congress has increased significantly compared to the previous Congress. The Republican-led House of Representatives established a special committee on China at the start of the 118th Congress, and in December adopted a policy recommendation report that included 130 proposed legislation and regulations.
The main measures under consideration by the US Congress include high tariffs, revoking China's Permanent Normal Trade Relations (PNTR) status, and preventing China from diverting its exports through third countries such as Mexico. The US granted PNTR status to China in 2001 as a condition for joining the WTO and opening its markets. However, current legislative efforts aim to revoke this status and impose tougher trade measures.
The U.S. Congress has been urging the Biden administration to strengthen Section 301 of the Trade Expansion Act on strategic items and has proposed invoking Section 232 of the Act to address national security threats posed by Chinese imports. In addition, Congress is considering various measures to regulate electric vehicles produced by Chinese companies in third countries.
The report warned that if the US blocks Chinese circumvention exports, Korean companies that use raw materials or intermediates made in China could face unexpected disadvantages. “If a Korean company imports raw materials made in China, processes them in Korea, and then exports the final product to the US, it could be mistakenly seen as circumventing tariffs imposed on Chinese companies, which could increase the burden of proof,” Han Ah-reum said, highlighting the potential challenges Korean companies face.
“The US has been trying to protect its domestic trade with Korea for a long time, but it has not been able to protect its domestic trade with Korea since 2013,” said a senior official at the Korea Trade and Industry Department, who is also a member of the Korean Trade and Industry Department.
The US will hold a presidential election in November, with 34 senate seats and 435 House of Representatives seats up for re-election. The report points out that if the Republicans win the presidential election and gain a majority in both houses of Congress, the pace of containment measures against China could accelerate. The report advises, “It is important to keep a close eye on developments in the US congressional elections, as changes in US trade policy depend not only on the authority of the president, but also on the role of Congress in setting policy agendas,” emphasizing the importance of keeping a close eye on developments in the US congressional elections.
The Korea Institute for Industrial Economics and Trade (KIET) released a report analyzing the risks to Korea's battery industry due to the outcome of the US presidential election. The report noted that Korean companies' share of the US battery market increased to 42.4% last year, surpassing Japan's. The Inflation Reduction Act (IRA) tax deduction requirements for electric vehicle batteries have worked to the advantage of Korean companies. However, the report warns that former President Trump's stance on abolishing the IRA could have a negative impact on Korea's battery industry. “Even if Trump is re-elected, it will be difficult to abolish the IRA, but there is a possibility that he will reduce support through an executive order,” the report said.
KIET recommends that Korean companies should closely monitor each congressional district in the U.S., especially key states such as Michigan, Ohio and Tennessee, where South Korea has made significant investments. “To prepare for risks related to Trump, it is necessary to monitor the developments in the U.S. presidential and congressional elections, especially the interests of each congressional district in key states,” the institute advises, emphasizing the need for a comprehensive reevaluation of Korean companies' investments in the U.S.
