South Korea has announced a significant US$250 billion support package for its exporters on January 20, 2025, in response to the growing uncertainty surrounding potential tariffs from incoming U.S. President Donald Trump. The move comes just hours after the country’s central bank revised its growth forecasts downward, citing the ongoing political instability in South Korea following President Yoon Suk Yeol’s declaration of martial law last month.
The political turmoil began in early December 2024 when President Yoon attempted to suspend civilian rule. Though lawmakers voted against the move within hours, it led to nationwide chaos. Subsequently, President Yoon was impeached and became the first sitting South Korean leader to be arrested in a criminal probe on charges related to insurrection.
Amid these internal political upheavals, the Ministry of Finance unveiled plans to bolster the nation’s export sector, including support for key companies such as Samsung and SK hynix, which have been particularly vulnerable to international trade risks. According to Kim Dong-joon, deputy director of the Ministry of Finance’s support division, the government is concerned about the potential adverse effects of the incoming U.S. administration on the nation’s exports.
Kim explained, “External uncertainties, such as the inauguration of the new U.S. administration, pose concerns about potential adverse effects on the export front for businesses.” As a result, the government is committing to provide export financing on an unprecedented scale, amounting to 360 trillion won (approximately S$338.7 billion) this year.
In addition to the export financing package, the government has pledged to address the increasing foreign exchange rate volatility by allocating additional funds to exchange rate fluctuation insurance. The value of South Korea’s won has recently fallen to record lows against the U.S. dollar, exacerbating the challenges for exporters.
The support package includes provisions for the Export-Import Bank of Korea to offer 50 trillion won over the next five years to sectors such as semiconductors and batteries, which have faced significant challenges in recent times. Moreover, the government plans to develop further financial support measures aimed at assisting promising industries like defense, nuclear energy, and shipbuilding, leveraging U.S.-Korea cooperation to expand export and contract opportunities.
South Korea has become a major arms exporter, particularly to NATO members like Poland, where it has signed significant deals for tanks and howitzers. However, despite its growing arms trade, South Korea continues to adhere to its longstanding policy of not supplying weapons directly to Ukraine.
The political instability, including the short-lived martial law, has contributed to a significant decline in consumer sentiment, which recently reached its lowest point since the COVID-19 pandemic. Even after President Yoon’s impeachment, the won’s value has continued to plummet against the dollar, while the country’s unemployment rate has surged to its highest level since 2021.
This comprehensive support package is part of South Korea’s efforts to stabilize its export sector and address the mounting risks posed by external uncertainties, especially as the country grapples with both political turmoil and economic challenges.
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