How Long Can Korea Delay the U.S. Investment Act While Tariff Hikes Loom?

Originally slated for passage by early next month,
but special committee gridlock and Lunar New Year delay leave timetable in limbo
Growing trade uncertainty

Yonhap News Agency

As the possibility of the United States raising tariffs on South Korea is once again being discussed, the legislative timetable for the “Special Act on Investment in the United States,” which would serve as the legal basis for implementing the Korea-U.S. strategic investment agreement, has effectively been shrouded in uncertainty. The original schedule has already been shaken, as the National Assembly’s special committee for handling the act fell into disarray from its very first meeting and the Lunar New Year holiday overlapped. Given that this bill is directly linked to trade variables, critics warn that the longer the legislative vacuum continues, the more both the government’s bargaining power and companies’ export strategies are exposed to uncertainty.

According to political sources on the 14th, when the National Assembly launched the special committee, the ruling and opposition parties alike presented late February to early March as the target window for passage. This reflected a shared perception that, in a situation where the U.S. administration is using tariff adjustments as a pressure tool, the speed of legislation itself would function as a negotiation card.

In reality, however, the schedule is taking a very different path. As the opposition continues to protest the ruling party’s push to pass judicial reform bills such as the Constitutional Complaint Act and the Act to Increase the Number of Supreme Court Justices, deliberations in the special committee have been drawn into partisan strife. The committee’s first full session was adjourned without even finalizing the agenda, resulting in the cancellation of a government work report and an explanation of the bill, and subsequent resumption of the schedule has also been delayed. Although both parties agree in principle that this is a bill for the national interest, the special committee has repeatedly stalled and failed to enter a full-fledged review stage of the bill as it becomes entangled with current political issues.

At least several meetings are needed to proceed through public hearings, consultations on revisions, and referral to a plenary session, but many in politics judge that there is simply not enough time available, especially with the Lunar New Year holiday overlapping. The prevailing view in political circles is that “even if the pace picks up after the holiday, it will be tight to bring the bill to a plenary session within this month or even by early next month.”

The government finds itself in a particularly difficult position. With the National Assembly’s legislative timetable delayed, the government has been using diplomatic channels to explain to the U.S. side the progress of the bill in the National Assembly and future plans, but Washington’s basic stance is said to have changed little. Some U.S. officials have sent messages expressing their expectation of legislative progress on the Korean side, but they are maintaining the position that what is needed is not just a discussion phase but visible progress. As a result, the government’s burden is growing as it is caught between diplomatic persuasion and the pace of domestic legislation.

Even so, the government has launched a temporary implementation framework centered on the “Korea-U.S. Strategic Investment Memorandum of Understanding (MOU) Implementation Committee” to respond. This committee is a government-level consultative body established to allow review of candidate investment projects even before the special act is passed. Relevant ministries, including the Ministry of Trade, Industry and Energy, participate to share trends in MOU implementation, examine the commercial viability of candidate projects and their contribution to the national interest, and discuss future implementation procedures. However, in the absence of the special act, there is a fundamental limitation in that it is difficult to translate these efforts into actual investment in the United States, due to a lack of legal basis for establishing funds, providing fiscal support, and executing investments.

Against this backdrop, industry views the “inability to know when a decision will be made” as a bigger risk than the tariff changes themselves. For key export items such as steel, automobiles, semiconductors, and batteries, even a change of several tens of percentage points in tariffs can cause annual costs to fluctuate by trillions of won, prompting companies to conservatively adjust plans for new investment and export volumes.

With the normalization of the special committee and the restarting of the legislative clock emerging as variables that will determine the next turning point in Korea-U.S. trade relations, the question of how far the original target window of late February to early March will be pushed back remains a source of pressure for both the market and the government.

This content was produced with the assistance of AI translation services.