Description: Facing Trump’s tariffs, the South Korean government has announced the support for its domestic semiconductor industry. Government packages to facilitate favorable manufacturing, research and development conditions on the South Korean market are expected to reach $23 billion. The spending would mostly be concentrated around industrial hubs such as the cities of Yongin – si and Pyeongtaek which have attracted substantial flow of both domestic and foreign direct investments from companies such as Samsung and SK Hynix. Subsidies are also planned to incentivize the automotive industry which would be backed by state – run lenders and automotive companies Hyundai and Kia. South Korea plans on dispatching high level government officials to negotiate tariff hikes and other trade issues with the US next week.
Impact: South Korea’s subsidies and aid strategies should be considered as a backstop if the trade negotiations with the US fail to deliver any results. The country’s government is currently focusing on boosting manufacturing as the economy largely depends on exports of crucial products from the automotive and semiconductor industries. With elections scheduled for Jun, the country is also facing boiling domestic political crisis caused by the declaration of martial law by impeached President Yoon Suk Yeol in Dec 2024. The US has adopted unselective aggressive and assertive foreign policy through the tariffs to allies and foes alike which positioned key strategic allies such as South Korea to explore other venues of acquiring economic and geopolitical stability, such as boosting domestic manufacturing and engaging in diplomatic efforts to form diversified strategic alliances.