South Korea Unveils $2B Emergency Aid for Auto Sector Amid US Tariffs

Post by: Raman Preet

The South Korean government has announced a big financial aid package worth 3 trillion won (about $2 billion) to support its car industry. This move comes after the U.S., under former President Donald Trump, introduced new tariffs on imported vehicles.

The new U.S. rule places a 25% tax on all cars brought into the country, including those from South Korea. This is a serious concern because almost half of South Korea’s car exports go to the U.S. In 2024 alone, South Korea exported nearly $71 billion worth of vehicles, making America its biggest market.

To help the industry cope with these challenges, South Korea will increase low-cost loans and support from government-run banks and agencies by 15%, bringing the total to 15 trillion won. The goal is to make it easier and cheaper for companies to borrow money during this tough time.

Part of the plan includes a special 1 trillion won fund, set up by Hyundai Motor and Kia along with banks and credit agencies. This fund will help smaller companies that make car parts to get loans or sell bonds to raise money.

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The government is also trying to boost local demand for cars by extending subsidies for people who buy electric vehicles (EVs) until the end of the year. It will also label self-driving car technology as an important national area for development, which means it will now receive tax benefits.

According to experts, the new tariffs could slightly reduce South Korea’s economic growth. The country is the third-largest exporter of vehicles to the U.S., behind only Mexico and Japan.

Even though Trump recently praised Hyundai for planning to invest $21 billion in the U.S. over the next four years, South Korea was still hit by the new taxes. An extra 25% duty has been placed on all South Korean exports, not just cars, putting extra pressure on the country’s economy.

In response, South Korea has sent its Trade Minister, Cheong Inkyo, to Washington, D.C., to try and negotiate a better deal and reduce the impact of these taxes.

While it’s not yet clear how the U.S. will respond, Trump said on Tuesday that after speaking on the phone with South Korea’s acting President Han Duck-soo, the chances of a new trade deal “look good.

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