South Korea has introduced a $2 billion support package to protect its automotive industry from new tariffs imposed by the United States.
The move follows President Donald Trump’s announcement of a 25 percent tariff on South Korean automobiles and auto parts, a measure expected to severely impact one of the country’s most important export sectors.
The emergency plan was revealed by the South Korean government on Wednesday after consultations with industry leaders. Officials described the tariffs as a serious threat to the economy, given that vehicles and related parts represent the largest share of South Korea’s exports to the US. Last year alone, the value of these exports reached nearly $43 billion.
Trump’s sweeping tariffs, which affect several major trading partners, officially take effect this week. South Korea’s automotive goods are among the hardest hit, prompting Seoul to act quickly to minimize damage and stabilize the domestic industry.
As part of the rescue package, the South Korean government will extend low-interest loans worth two trillion won—approximately $1.34 billion USD—to automakers facing increased costs due to the tariffs. Additionally, Hyundai Motor will collaborate with top financial institutions to create a separate one trillion won fund to support domestic car manufacturers.
To provide immediate financial relief, companies affected by the US tariffs will be allowed to defer taxes for up to nine months. The government also plans to expand electric vehicle subsidies through the end of the year. The amount of public support tied to manufacturer discounts will rise, with the government increasing its matching contribution from the current 20–40 percent range to 30–80 percent.
Officials believe boosting the domestic market is essential to help absorb losses from declining exports. Strengthening internal demand could help preserve the country’s manufacturing base as global trade tensions escalate.
President Trump’s tariff decision has rattled global markets and added new uncertainty to the world economy. Although Trump has hinted at being open to negotiations, he remains firm in his aim to reduce US trade deficits. In 2024, the United States recorded a trade deficit of more than $66 billion in goods with South Korea.
South Korea’s acting president held discussions with Trump on Tuesday to address the issue, but no resolution has been reached. As the tariffs go into effect, Seoul is preparing for continued economic challenges and has promised to adjust its response as the full impact on the industry becomes clearer.