EV Disagreement Main Issue at South Korean President Yoon’s U.S. Visit

South Korean President Yoon’s first official visit to the United States is dominated by the two countries’ disagreement over new electric vehicle (EV) tax credit rules the U.S. has set with its Inflation Reduction Act (IRA), signed by Biden into law last month. The new rule has disrupted the recent display of alliance between Washington and Seoul. Yoon departed for New York on Monday to attend the UN General Assembly, where he briefly met with Biden on the sidelines.

The two leaders were previously expected to hold a summit in New York to discuss North Korea’s growing weapons threats, as well as South Korea’s concerns over the IRA.

While the summit did not materialize, South Korea President’s Office said Yoon asked Biden to resolve South Korea’s concerns over the IRA, and Biden responded he was well aware of the concerns. Biden also said the two sides should continue serious discussions about the matter, the office said in a press release.

The IRA eliminates federal tax credits for electric vehicles (EVs) made outside North America, meaning companies including South Korea’s Hyundai and its affiliate Kia will no longer be eligible for such subsidies.

The law has sparked protests from Seoul, which expected a commitment from Biden as he pledged to boost bilateral economic ties after South Korean companies agreed to make major investments and build factories in the United States.

Seoul officials have asked Washington to postpone the new rules until Hyundai completes building its Georgia factory in 2025.

South Korea is expected to press on for a change, as a number of high-level South Korean officials have been mobilized in recent weeks to relay concerns to their U.S. counterparts. Trade Minister Lee will travel to the United States this week to discuss the IRA.

Speaking in parliament on Tuesday, South Korean Prime Minister Han said the IRA “seems to be a violation of the Free Trade Agreement” between the two nations. However, the South Korean government is focusing on bilateral dialogue for now, he added.

Yoon has also been struggling to make progress on other key diplomatic and security agenda such as improving relations with Japan and enticing North Korea back to denuclearization talks.

Seoul and Washington are exploring how to reopen denuclearization talks.

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