SEOUL: South Korea on Wednesday announced a $2 billion emergency support package for its vital auto sector, aiming to mitigate the impact of Trump's tariffs which are set at 25 percent on imported vehicles and light trucks. The tariffs, effective immediately, cover over $460 billion in annual imports, raising concerns about potential significant repercussions for South Korean automakers, whose exports to the U.S. totaled $34.7 billion in 2024, making up 49 percent of the nation's total auto exports.

The government's support package will include financial aid, tax cuts, and increased subsidies aimed at boosting domestic demand. In an effort to support car manufacturers, the South Korean government is planning to enhance its low-cost financing program by 2 trillion won (approximately $1.34 billion), while Hyundai Motor has committed to establishing an additional 1 trillion won assistance program in collaboration with major financial institutions. Furthermore, companies affected by the tariffs will be eligible for tax deferrals of up to nine months.

As experts warn of potential significant damage to the industry, the government's measures are designed to stabilize the market amid rising costs. The South Korean government stated, "Given that automobiles and auto parts are South Korea's top exports to the U.S., the imposition of these tariffs is expected to be a considerable blow to our auto industry.” To further assist, tax reductions on car purchases will decrease from the current 5 percent to 3.5 percent through June 2025.

Hyundai Motor is proactively addressing customer concerns by committing to maintain stable sticker prices for its current model lineup for at least the next two months. This strategic decision is part of a broader initiative to mitigate the potential fallout from the tariffs on dealership inventories. Analysts note that while these measures can provide short-term relief, the long-term effects of tariffs may significantly alter production and supply chain dynamics, particularly for electric vehicles that rely heavily on imported parts from countries like China.

The South Korean government has emphasized its intention to negotiate with the U.S. to ensure that South Korea is not treated less favorably than other allies. "We will do our best to ensure that the U.S. does not treat South Korea in a disadvantageous way compared with other allies, enhancing bilateral cooperation moving forward," stated officials.

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