Republican presidential nominee and former U.S. President Donald Trump listens to speeches on the opening day of the Republican National Convention (RNC) at the Fiserv Forum in Milwaukee, Wis., Monday (local time). The convention comes just two days after a 20-year-old Pennsylvania man attempted to assassinate him. EPA-Yonhap

With the odds of former U.S. President Donald Trump's reelection increasing following an assassination attempt on him last week, Korean businesses are cautiously anticipating potential policy changes and uncertainties that may arise during a possible second Trump presidency.

While there are clear concerns about the potential negative impact on the Korean economy, experts and industry officials stress the importance of adopting a prudent approach and carefully monitoring the actual administrative policies. They argue that Washington's principle of demanding greater investments in the U.S. will likely persist unchanged, irrespective of whether Donald Trump or Joe Biden wins a second term in office.

During the Biden administration, Korea enjoyed a sharp growth in its trade surplus with the U.S. Korea achieved a historic trade surplus of $44.4 billion with the U.S. last year, the largest ever recorded in their trade history. Chances are high for a new record high this year, as the trade surplus reached $28.7 billion in the first half alone.

As a result, analysts are concerned that Trump might resort to imposing tariffs to address the trade deficit between Washington and Seoul. The Korea Institute for International Economic Policy said in a report in April that if the Trump administration implements stringent tariff measures, Korea's annual exports to the U.S. could fall by as much as $24.1 billion.

U.S. President Joe Biden, center, poses for a selfie with guests following an event to celebrate the enactment of the Inflation Reduction Act of 2022, on the South Lawn at the White House in Washington, D.C., Sept. 13, 2022. Reuters-Yonhap

“Trump has been taking an exclusive stance against countries with which the U.S. faces trade deficits, including Korea,” said Jang Sang-sik, head of trade trend analysis at the Korea International Trade Association (KITA).

“And notably, about 60 percent of Korea's trade surplus with the U.S. comes from the automotive sector.”

Gaining attention is Trump's pledge to roll back the Inflation Reduction Act's (IRA) support for electric vehicles and clean energy, which offers tax breaks and subsidies for carmakers and battery makers.

“I don't believe that Trump will be able to scrap the IRA immediately even if he takes office, because it is a law whose revision should entail congressional consent,” said Lee Jae-mook, a political science and diplomacy professor at Hankuk University of Foreign Studies (HUFS), citing the former U.S. president's failure in 2017 to abolish his predecessor's "Obamacare."

“Instead, he may be able to use executive orders, tariffs or other presidential powers to strengthen his protectionist approach.”

KITA's Jang also echoed a similar view that an immediate rollback of the IRA is unlikely, given that many EV or battery plants are located in Republican states, but Trump may be able to rely on executive orders to cut incentives and tax breaks.

An official at the domestic automotive industry said that such a policy change, however, will not affect Korean companies' strategies of expanding investments in the U.S.

“Regardless of who wins the election, Korean firms have to expand their investments in the U.S. for the sake of the U.S. EV market itself,” the official said.

“For cost-efficiency, companies have to make battery modules for EVs and assemble them into actual vehicles on U.S. soil, given the weight of battery modules and other technical aspects … We believe the basic economic policy principles of Trump and Biden are similar — attracting more direct investments into the U.S. The difference lies in whether it will be enforced through a stick (tariffs or other punitive measures by Trump) or a carrot (incentives by the Biden administration).”

A battery industry official said while there is a slim chance of an immediate rollback of the IRA should Trump win a second term, the more likely risk is a potential stagnation of the EV and clean energy industries. The official expressed concerns that, even without direct policy reversals, a second Trump administration might create an environment that could slow down the growth of these sectors.

"I don't think Trump will fundamentally defy the global trend of the EV and eco-friendly industries, but it is hard to rule out the possibility that the Trump administration may slow down eco-friendly policies,” he said.

“So, the important task for Korean companies will be to sense and predict how these actual policies will take shape.”

A battery plant of Ultium Cells, a joint venture between LG Energy Solution and General Motors, is seen in Tenn., June 4. Yonhap

HUFS' Lee also said that the contradicting policies of Biden and Trump on fossil fuels and the transition to eco-friendly energy could cause significant confusion in the Korean automotive and energy industries, and “an abrupt U-turn” in the U.S. government's regulations on the energy market might also impact domestic companies.

An official at a domestic home appliance company said, “There are contradicting assumptions about whether a second Trump presidency will deal a hefty blow to the Korean businesses,” although the general view is that “it is not the first time that Korean companies will be facing a protectionist U.S. government.”

“The election is now in the campaigning period, meaning rhetoric and policy promises are meant to be strong and provocative,” an official at a business conglomerate said.

“And as we have witnessed in the controversy between Korea and the U.S. over the IRA, regardless of who becomes the president, such issues could be government-to-government discussions. This underscores the need for the Korean government to play a role in navigating through this uncertain period."

KITA's Jang said Korean businesses now appear to be deliberating between the worst-case scenario under a potential Trump administration and a situation where there would be minimal economic impact.

“Given the accumulated experience of Korean firms in the first Trump presidency, I believe the most likely outcome appears to be either no significant impact or a slight slowdown, possibly resulting in a modest decrease in sales,” Jang said.