The government will strengthen fiscal support for the infrastructure, investment, R&D, and human resource development sectors in the domestic semiconductor industry, which has become uncertain due to the tariff policy of the U.S. Trump administration. Although it has not yet been determined how much tariff will be imposed on the semiconductor industry, the plan is to proactively maintain Korea's super gap competitiveness in semiconductors.
In the field of artificial intelligence, the government will focus support on infrastructure and industrialization with the goal of a leap to G3. In the bio sector, it will expand support for corporations entering the U.S. market and actively support biosimilars and new drug development. The plan for R&D investment in the bio sector and directions for regulatory improvement are also expected to be announced within this month.
The government will expand policy finance support and strengthen tax support for secondary batteries. In the steel sector, it aims to secure competitiveness based on high value-added and low-carbon technology while actively responding to dumping from other countries.
The shipbuilding industry plans to strengthen Korea-U.S. cooperation by utilizing the demand for maintenance, repair, and operations from the U.S. The petrochemical sector will continuously push for business restructuring, including the rationalization of excessive supply facilities.
On the 9th, the government announced the 'Future Policy Directions for Responding to Changes in the Trade Environment' at the Economic Ministers' Meeting and Industrial Competitiveness Reinforcement Ministers' Meeting, chaired by Deputy Prime Minister and Minister of Economy and Finance Choi Sang-mok.
◇ Concerns over a 7% decrease in Korean exports… possibility of windfall profits due to China restraint
The U.S. Donald Trump administration imposed tariffs on a per-item and per-country basis to foster domestic manufacturing and alleviate the trade deficit. The item-specific tariffs are currently imposed on steel, aluminum, and automobiles. Tariff rates for semiconductors and pharmaceuticals will be determined and announced soon.
In addition, reciprocal tariffs were imposed by country. A 25% tariff rate was imposed on South Korea, with Japan at 24%, Taiwan at 32%, and Vietnam at 46%. For China, an existing tariff of 20% has been supplemented with a reciprocal tariff of 34%, and on the 8th (local time), it was stated that an additional retaliatory tariff of 50 percentage points would be imposed, totaling 104%.
The tariff actions by the U.S. are prompting major countries to impose retaliatory tariffs, intensifying the tariff war. China, in particular, has imposed a 34% tariff on all U.S. imports while also initiating export controls on rare earth materials. The European Union has indicated plans to implement retaliatory tariffs amounting to 26 billion euros on steel tariffs starting from the 15th, and is considering retaliatory tariffs on reciprocal tariffs.
The government believes that this U.S. tariff policy will likely increase the prices of domestically produced goods, significantly decreasing exports and production to the U.S. A government official noted, "The export impact will be substantial in the highly U.S.-dependent automotive and steel sectors," adding, "Sales and production of home appliances and displays may also be restricted due to decreased overseas production in places like Vietnam."
However, there are also possibilities of windfall profits arising from the fact that the tariff rate against China, a competing country in the export market, is increasing.
Market assessments are also not positive. KB Securities analyzed that total Korean export volume may face a downward pressure of up to 7% and a growth rate decrease of up to 0.4 percentage points due to this tariff measure. IBK Economic Research Institute projects a 12.8% drop in exports to the U.S. and a 4.6% drop in overall exports with the imposition of a 25% tariff.
◇ Responses to the U.S. negotiations and corporate support… the government pushes for a two-track response
The government plans to promote a response strategy focused on reducing tariff rates on Korean products through U.S. negotiations while alleviating burdens on corporations.
For corporations that are suffering losses due to declining exports, the government plans to significantly expand export vouchers, including tariff response vouchers. A special policy finance program for affected sectors will be established. New special loan programs for crisis response will be created through the Industrial Bank of Korea and the Export-Import Bank of Korea, along with a special guarantee for management crisis support for corporations facing liquidity shortages.
To stimulate the domestic automotive industry, which has been hit hard, the government is considering expanding subsidies for electric vehicles and additional support for purchase tax incentives for new cars.
The government will also promote export diversification. It will expand the hosting of international fairs to discover alternative export markets such as the Global South and operate major country export platforms to identify 30 key export projects.
The government will accelerate trade negotiations with major countries, including South Korea, Japan, and China, under the Free Trade Agreement (FTA). It will also seek measures to expedite agreements already reached with countries like the United Arab Emirates and Ecuador.
The government will promote the abolition of preliminary feasibility studies (PFS) for key industries. In the case of high-value technologies that are economically significant, additional designations as 'national strategic technologies' will also be considered.
To this end, the government aims to amend the National Finance Act and the Basic Science and Technology Act this year. If there are delays in the legal amendments, fast-track options such as exemptions from feasibility checks will be utilized.
For advanced industries, the government plans to establish and operate the 'Advanced Strategic Industry Fund' for large-scale equity investments, loans, and guarantees within the year. It will also initiate consultations to pass the Semiconductor Special Act in the National Assembly and detail a support plan for the undergrounding expenses of the semiconductor cluster's transmission line, estimated at 1.8 trillion won.
The government plans to actively consider designating areas densely populated with industries and corporations that are affected by changes in the trade environment as industrial and employment crisis areas.