South Korea outlines emergency measures in response to U.S. auto tariffs

The South Korean government has announced a set of emergency measures aimed at supporting the domestic automotive and parts industries following the United States’ imposition of a 25% tariff on imported vehicles and auto parts. These measures were confirmed during an economic ministers’ meeting chaired by Deputy Prime Minister Choi Sang-mok on April 9.

In response to the tariff implementation under Section 232 of the U.S. Trade Expansion Act, which began on April 3 for vehicles and will extend to parts on May 3, the government will inject an additional 2 trillion won in policy financing, bringing the total to 15 trillion won. The government will consider further support based on the pace of disbursement and the evolving impact of the tariffs.

Small and medium-sized enterprises affected by the tariffs will have access to expanded emergency management stabilization funds. Additionally, corporate, value-added, and income tax deadlines may be extended by up to nine months for impacted businesses, and customs duties may be deferred for up to one year.

To boost domestic demand, the government will extend the current electric vehicle subsidy program from the first half of the year through the end of the year. The subsidy matching ratio will be increased from 20–40% to 30–80%. A temporary reduction in the individual consumption tax on new car purchases, from 5% to 3.5%, currently in place through June, may also be extended.

Major manufacturers, including Hyundai and Kia, will participate in a 1 trillion won support program alongside financial institutions to assist suppliers with loans, guarantees, and bond issuance.

The Ministry of Trade, Industry and Energy and the Ministry of SMEs and Startups will continue regional consultations with parts suppliers to improve their response to the tariffs. Information resources such as KOTRA’s “Tariff Response 119” service and regional support centers will remain in operation.

To support export diversification, the government will promote access to emerging markets through early implementation of trade agreements and the resumption of negotiations, including with Mexico. Trade support projects such as exhibitions and delegations will focus on countries with high FTA utilization, such as the Philippines, UAE, and Ecuador. Export voucher funding will increase by over 100 billion won, and the extension of trade insurance support until the end of the year is planned.

To reduce logistics costs, dedicated cargo space will be secured for parts suppliers.

To maintain domestic production capacity, the government will strengthen policy support to improve the investment environment and productivity. Autonomous driving technology will be added to the list of national strategic technologies, expanding tax credits for related R&D and facility investment. The scope of “clean production facilities” eligible for tax benefits within the capital region will be expanded to include processes beyond painting, such as body and assembly work.

Hyundai Motor Group has announced a 24.3 trillion won investment this year in electric vehicle plant facilities, electrification, and software-defined vehicle (SDV) R&D. The government plans to support these investments by assigning dedicated officials for approvals and accelerating disbursement of 200 billion won in foreign investment incentives.

The government also plans to promote the commercialization of advanced automotive technologies. This includes permitting the sale of Level 4 autonomous vehicles and developing an integrated roadmap for autonomous technology and a basic plan for the future parts industry covering 2025 to 2029. An early-stage investment of 500 billion won will be allocated to support development of autonomous systems and core components.

Strategic governance for U.S. trade relations will be restructured through a task force chaired by the Prime Minister. The government aims to secure tariff terms that are not less favorable than those of allied countries. Legislative and institutional revisions will be pursued promptly, and the situation will be regularly reviewed in cooperation with industry stakeholders.