South Korea is caught in a geopolitical and economic vise. After pouring billions into U.S. clean energy infrastructure and positioning itself as a trusted alternative to China, Seoul now faces the risk of being sidelined by a surprise trade deal between Washington and Beijing.
Korea’s Clean Energy Bet: A Strategic Gamble
The clean energy bet made by South Korea over the past several years was bold—and expensive. Companies like Hyundai, LG Energy Solutions, SK On, and Samsung committed over $90 billion to build electric vehicle (EV) plants, battery factories, and wind tower facilities across the United States. This move aligned perfectly with the Biden administration’s Inflation Reduction Act, which offered generous tax credits for domestic clean tech manufacturing.
For Korea, the strategy was twofold: secure access to the massive U.S. consumer market and strengthen its role as a reliable, non-Chinese supplier of critical green technologies. It worked—for a while.
Trump’s Tariff Reversal Upends the Game
With Donald Trump back in the White House, U.S. energy policy has pivoted sharply toward fossil fuels. Federal support for EVs and renewables has been rolled back, and American automakers have slowed or paused their EV transitions. This shift alone threatened Korea’s clean energy investments.
But the bigger blow may be coming this week. At the Asia-Pacific Economic Cooperation (APEC) summit, President Trump is expected to announce a trade agreement with Chinese leader Xi Jinping that could ease tariffs on Chinese clean tech exports—including batteries and solar panels.
If finalized, this deal could erase South Korea’s hard-won competitive edge in the U.S. market.
Why Korea Can’t Pick a Side
South Korea’s dilemma is structural:
- Defense dependency: It relies on U.S. military protection against North Korea.
- Economic ties to China: It imports critical raw materials like graphite and photovoltaic cells from China and exports electronics to Chinese consumers.
- Market access: The U.S. remains its largest export destination for high-value manufactured goods.
“They went all in,” said Henry Haggard, a former U.S. diplomat in Seoul. “The biggest concern is if the U.S. and China make a deal that disadvantages Korea.”
The LNG Pressure Play
To appease the Trump administration, Korean President Lee Jae Myung recently pledged to purchase $100 billion worth of American liquefied natural gas (LNG)—despite the fact that Korea’s own energy strategy is shifting away from fossil fuels.
Currently, only about 10% of Korea’s LNG comes from the U.S., with the rest sourced from the Middle East and other regions. Analysts warn that locking into long-term, high-price U.S. gas contracts could prove financially burdensome, especially as Korea aims to cut greenhouse gas emissions and expand wind and solar capacity.
“Diversifying supply sources is important,” noted Taesik Kim, a research fellow at the Korea Energy Economics Institute. “Relations between nations can change over time—sometimes drastically.”
What’s at Stake for Korean Industry?
Korean battery makers like LG and SK have built U.S. factories specifically to avoid Chinese competition and benefit from tariff protections. A U.S.-China deal that allows Chinese firms to export batteries made outside China—or even build U.S. plants—would directly threaten those investments.
“It’s a double-edged sword,” said Andrew Yeo of the Brookings Institution. “Easier access to Chinese materials helps Korea, but more Chinese competition in the U.S. market hurts it.”
Industry analysts are now watching for clarity. “They want to know: What are the new rules of the road?” said Tim Bush of UBS Securities.
Conclusion: A Precarious Balancing Act
South Korea’s attempt to navigate the U.S.-China energy divide has always been risky. But with Washington’s priorities in flux and Beijing ready to strike deals, Seoul’s clean energy bet may no longer pay off. For now, Korean leaders are walking a tightrope—with no safety net in sight.
