For Korea Inc., Trump's Big Beautiful Bill is a lot of pain, some gain

U.S. President Donald Trump is set to sign the One Big Beautiful Bill Act into law — legislation that is expected to impact Korean companies with production bases in the United States, including in the automotive, solar energy and battery industries.

U.S. House Speaker Mike Johnson shows the final tally of the vote on U.S. President Donald Trump's tax bill on the floor of the House of Representatives at the U.S. Capitol in Washington on July 3. Congress passed the One Big Beautiful Bill Act, despite misgivings in his party over concerns that the national debt will balloon and the historic assault on the social safety net. [AFP/YONHAP]

U.S. President Donald Trump is set to sign the One Big Beautiful Bill Act (OBBBA), his signature tax cut bill, into law — legislation that is expected to impact Korean companies with production bases in the United States, including those in the automotive, solar energy and battery industries.

The U.S. House of Representatives passed the OBBBA on Thursday — reflecting amendments made by the Senate — with 218 votes in favor and 214 against. Having passed both chambers, the bill will be officially enacted once Trump signs it on Friday.

The bill significantly reduces or terminates various tax credits and subsidies originally established under the Inflation Reduction Act.

The most significant change is the repeal of EV tax credits. Previously, buyers of EVs that met country-of-origin requirements could receive up to $7,500 in tax credits.

Originally set to remain in place through the end of 2032, the credit will now end after Sept. 30 under the OBBBA. Even the minimum exemptions secured under Korea-U.S. agreements — such as tax credits for leased or commercial EVs — have been nullified.

Automakers that had expanded U.S. production to benefit from the tax incentives are now facing difficulties. Hyundai Motor and Kia plan to offset the anticipated decline in EV sales by boosting hybrid vehicle sales.

“With rising demand for hybrid vehicles in the United States and our competitive lineup of hybrid models compared to other companies, we expect a positive consumer response,” said a Hyundai Motor representative.

U.S. President Donald Trump arrives for a rally to kick off the July Fourth holiday weekend at the Iowa State Fairgrounds in Des Moines, Iowa, on July 3. Trump used the opportunity to tout his just-passed One Big Beautiful Bill Act, which outlines his administration's spending priorities. [AFP/YONHAP]

Renewable energy companies such as those in the solar and wind sectors are also likely to be affected. The power generation tax credit, originally set to continue through 2032, will now end in 2027.

The scope of subsidies has also been limited to companies producing and supplying electricity by 2027. This could negatively impact Korean firms such as Hanwha Qcells, which is building a solar panel plant in Georgia, and OCI, which is constructing a solar cell factory in Texas.

Battery makers like LG Energy Solution, Samsung SDI and SK On have been relatively spared. The Advanced Manufacturing Production Credit remains intact in the bill. These companies have been receiving up to $45 in tax credits per kilowatt-hour of batteries produced in the United States.

However, the credit will gradually be phased out and fully expire in 2033, allowing time for investment in energy storage system production facilities in the country.

The One Big Beautiful Bill Act is seen during an enrollment ceremony at the U.S. Capitol in Washington on July 3. The House passed the sweeping tax and spending bill after winning over fiscal hawks and moderate Republicans. The bill makes permanent U.S. President Donald Trump's 2017 tax cuts, increases spending on defense and immigration enforcement and temporarily cut taxes on tips, while at the same time cutting funding for Medicaid, food assistance for the poor and clean energy, and raises the nation's debt limit by $5 trillion. [AFP/YONHAP]

The bill also bars tax credits for products that receive “material assistance” from “prohibited foreign entities” like Chinese firms if such support exceeds a certain percentage of the total production cost. This could provide a competitive edge to Korean battery makers facing threats from low-priced Chinese products.

Semiconductor companies such as Samsung Electronics and SK hynix will benefit as well. The tax credit for companies investing in U.S. production facilities will rise from 25 percent to 35 percent.

Facilities that began operation after the end of 2022 and those that start construction by the end of 2026 will qualify. Companies like Samsung Electronics, SK hynix, Intel, TSMC and Micron, which are already operating or investing in U.S. facilities, are expected to benefit.

However, as Trump has stated his intent to renegotiate contracts made under the previous Joe Biden administration, the actual size of the tax credits and subsidies may be subject to change.

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff. BY KIM KI-HWAN, KIM HYO-SEONG [lim.jeongwon@joongang.co.kr]