Now is the time to maintain 'cautious optimism' regarding investment in the U.S.

Hansin Kim / Attorney, Chairman of the Center for U.S.-Korea Politics and Economy

With the U.S. midterm elections approaching this November, voices calling for caution regarding U.S. investment are emerging amidst deepening inflation and mounting policy uncertainty. Kim Han-shin, co-managing partner of LACWKRR (Lee Anav Chung White Kim Ruger & Richter LLP), whom I met recently at the 24th World Korean Business Convention, explained, "Compared to the announced scale of U.S. investment, the perceived pace of execution is rather cautious." He added, "While government-strategized industries like semiconductors are active, follow-up investments in other sectors, partner companies, and mid-sized and small enterprises are in a wait-and-see mode."

The reason lies in economic uncertainty. He analyzed, "It is difficult to determine investment profitability as tariff and subsidy policies change. Furthermore, following the detention of workers at the Hyundai Motor-LG Energy Solution joint venture battery plant last September, the burden of interest rates, construction costs, and labor costs is high, in addition to risks related to visas and personnel issues." He concluded, "While the judgment that a U.S. base is necessary remains, investment execution will only accelerate once policy directions stabilize."

Attorney Kim, who practices in Los Angeles, California, is a director of the LA chapter of the World Federation of Korean Economic and Trade Associations and a cross-border corporate law expert assisting Korean companies in entering the U.S. market and facilitating various mergers and acquisitions (M&A) and investment transactions. While expressing optimism regarding the U.S. economy recently, he emphasized caution. Attorney Kim stated, "The perceived economic sentiment is closer to 'cautious optimism'," adding that "companies are delaying decision-making due to interest rates and tariffs, and negotiations on terms for real estate investments and local borrowing transactions are dragging on." He explained, "Nevertheless, demand for securing production bases within the U.S. in sectors such as manufacturing, energy, and biotechnology remains steady, and demand for advisory services regarding the conversion of branch offices into local subsidiaries or the establishment of affiliates continues."

◆ Uncertainty Persists After Midterm Elections

The upcoming U.S. midterm elections in November are also expected to serve as a turning point. Attorney Kim predicted, "While midterm elections are always disadvantageous to the ruling party, the atmosphere appears more difficult for the Republican Party this year due to the war." He added, "The sharp rise in gas prices, which are a symbol of inflation, is significantly threatening the perceived economy, and the expectation that economic policy uncertainty will persist even after the election will have a negative impact."

For the success of Korean companies investing in the U.S., he particularly emphasized the importance of pre-investment consultation and due diligence within the U.S., rather than applying success formulas from Korea.

Attorney Kim stated, "In Korea, there is often a tendency to simply transfer the standards and practices of the headquarters, which increases the likelihood of disputes." He stressed, "It is necessary to create a U.S. business checklist and conduct thorough due diligence on corporate structure, visas, employment, taxation, and licensing." He further advised, "You must cross-verify a partner's reputation through local networks and meticulously incorporate 'terms for separation' as an exit strategy," noting, "The success or failure of a joint venture is revealed not during good times, but during difficult times."

◆ Hope for Expanded Information Exchange within the Hansang Network:

He also emphasized the need for the business evolution of the Hansang Network. Attorney Kim stated, "Until now, Korean networks have operated primarily for socializing, resulting in weak information exchange and connections across industries and specialized fields." He added, "I hope to establish a channel for Korean companies to receive advice from the initial stages of market entry by forming a pool of experts, such as lawyers and accountants, by country and region. Furthermore, I hope to strengthen performance tracking functions so that companies and overseas businesspeople connected at the World Korean Business Convention can successfully complete actual transactions."

Finally, he emphasized, "This is a crucial time when K-industries—including K-culture, K-food, and K-beauty—are receiving global attention." He stressed, "We must create sustainable momentum that leads to our companies' overseas expansion and investment so that this trend does not remain a temporary fad." He concluded by adding, "With a sense of responsibility as ambassadors of the Korean Business K-Wave, going beyond individual business success to build a network that the entire overseas community and future generations can rely on together will be the true meaning of being an 'irreplaceable global Korean businessperson.'"

(This article was published as an interview with Hansin Kim in Maeil Business. The views expressed in this article are those of the author(s) and do not necessarily represent the official stance of the center.)