Harris vows to work with South Korea on EV dispute, plans to meet with semiconductor execs

U.S. Vice President Kamala Harris vowed to work with South Korea to resolve a trade dispute stemming from the Inflation Reduction Act, as the longtime allies reaffirmed their defense ties in the Indo-Pacific theater.

Harris, visiting Tokyo to attend former Japanese leader Shinzo Abe's funeral, told South Korean Prime Minister Han Duck-soo Tuesday she "understood" his country's concerns about tax incentives for electric vehicles under the law, according to a U.S. readout. "They pledged to continue to consult as the law is implemented," it added.

The comments come just weeks after South Korea strongly protested the Inflation Reduction Act signed last month by President Joe Biden. Provisions including tax credits of as much as $7,500 for purchases of electric vehicles made in North America threaten to disadvantage major South Korean brands like Hyundai and Kia.

The U.S. law requires carmakers to assemble their EVs in North America to receive subsidies, but Hyundai Motor Co. doesn't yet have any operational electric car plants there. All three of South Korea's main battery makers -- LG Energy Solution Ltd., SK On Co. and Samsung SDI Co. -- import most of their critical minerals from China, another obstacle in the law for the nation's automakers.

The disadvantage risks hurting Hyundai's performance in the U.S., where this year it's second in EV market share after Tesla. South Korea invested $27.6 billion in the U.S. last year, and Hyundai plans to spend $5.5 billion building EV and battery facilities in Georgia.

The friction risks Biden's efforts to build a tighter network of partners to counter China's rising influence. South Korea is key in initiatives such as the Indo-Pacific Economic Framework and the so-called Chip 4 Alliance of major semiconductor manufacturing nations. The EV dispute has clouded Yoon's campaign promise to bolster ties with the US on economic issues, as well as security.

In the meeting, the allies agreed to work together for the establishment of "peace, stability, and prosperity in the Indo-Pacific and around the world," the statement said. Harris also "welcomed steps to broaden the alliance to take on the defining challenges of our time," it added.

Meanwhile, Harris will meet Wednesday in Japan with heads of semiconductor-related businesses as the Biden administration works to boost U.S. chips manufacturing, according to a senior administration official.

Harris will talk to the executives about incentives now available to invest semiconductor manufacturing within the U.S. following the August enactment of a law providing $52.7 billion in subsidies for the industry.

She is also expected to tout the benefits of those companies moving manufacturing hubs away from a dependence on single, low-cost countries like China to prevent disruptions.

President Biden has prioritized building high-tech chips in an effort to preserve high-paying American jobs and counter the rising market dominance of China, who he views as Washington's key strategic competitor.

The chips funding legislation was also designed to help to alleviate a persistent chips shortage that has prevented the manufacture and sale of everything from cars, weapons, washing machines and video games.

Those shortages have worsened U.S. consumer price inflation, which topped 8 percent on an annual basis in August.
Executives from at least 13 companies will attend, including Sanken Electric, Tokyo Electron, Hitachi High-Tech, Fujitsu and Nikon, according to another U.S. official who declined to be named previewing the meeting.

Reuters contributed