The government will provide 3 trillion won in emergency policy financing to the automobile industry, which has been hit hard by the mutual tariff imposition by the United States.
According to the financial sector on the 6th, the government is preparing to support policy financing as difficulties in the domestic automobile industry are expected due to the 25% tariff imposed by the U.S. on domestic export automobiles. A senior official from the financial authority said on the 6th, "We are consulting with relevant ministries regarding measures to support the automotive industry affected by the tariff shock, and we are watching the impact on gross domestic product (GDP) very seriously, so we need to mobilize all available support capacity."
The existing financial support programs of policy financing institutions, including the Industrial Bank of Korea, are expected to be expanded. This year, policy financing institutions, including the Industrial Bank of Korea, the Industrial Bank, the Korea Credit Guarantee Fund, and the Korea Technology Credit Guarantee Fund /Kibo Technology Fund, have agreed to supply 248 trillion won to alleviate business management difficulties caused by worsening external conditions and to reorganize existing industries. They have decided to execute up to 60% of the support by expanding execution by 10 trillion won compared to previous years by this month.
The government has also decided to establish a high-tech strategic industry fund of up to 50 trillion won for five years to support future vehicles and respond to increased external uncertainties following the inauguration of the Trump administration last month. The support is set to begin within the year once relevant amendments to the Industrial Bank Act and government guarantee approvals pass in the National Assembly. Currently, the ruling and opposition parties are pushing for joint proposals.
The financial authorities plan to convene the five major financial holding companies on the 7th to emphasize smooth funding supply to corporations heavily impacted by the tariff shock. Financial Services Commissioner Kim Byung-hwan will hold a financial situation assessment meeting with the five major financial holding company chairs, the Korea Federation of Banks, the Korea Financial Investment Association, the Industrial Bank of Korea, the Industrial Bank, the Korea Credit Guarantee Fund, the Deposits Insurance Corporation, the Korea Exchange, and securities firms. Commissioner Kim plans to assess the short- and long-term funding situations of corporations significantly affected by the tariff shock and stress the importance of funding supply. The financial authorities estimate that the scale of lending to the automobile industry or market borrowings (exposure) is about 50 trillion won.
Earlier, President Trump signed an executive order on the 26th of last month, stating, "What we need to do is impose a 25% tariff on all cars not produced in the U.S." Automobiles are the top export item from Korea to the U.S. Last year, the export value of automobiles to the U.S. was $34.744 billion, accounting for 49.1% of the total automobile export value of $70.789 billion. The Economic Research Institute of the Industrial Bank of Korea recently analyzed in a report that if the U.S. imposes a 25% tariff on the automobile industry, the export value of Korean automobiles to the U.S. could decrease by 18.59% compared to the previous year.