Advertisements

South Korea Unveils Record Export Support

by Celia

South Korea is taking proactive measures to counter potential disruptions in its trade relationships as it braces for the impact of the policies of U.S. President Donald Trump’s second term. On January 20, the government announced a record level of export financing support for 2025, amounting to 360 trillion won (approximately S$337 billion). The initiative aims to assist exporters in navigating any adverse effects stemming from shifts in U.S. trade policies.

In a statement, the Ministry of Finance acknowledged growing concerns over heightened external uncertainties under the incoming U.S. administration, particularly the possibility that new policies could negatively affect South Korean exports. The ministry revealed that alongside the extensive financing package, it would also enhance insurance support to shield against foreign exchange volatility, increasing the budget to 1.4 trillion won this year, up from 1.2 trillion won in 2024. Additionally, the government will increase spending on trade-related initiatives such as trade fairs and delegations to 2.9 trillion won, compared to 2.1 trillion won last year.

Advertisements

Sectors most vulnerable to shifts in U.S. policy include semiconductors and rechargeable batteries. However, industries such as defense, nuclear energy, and shipbuilding are expected to see more positive outcomes due to potential cooperation with the U.S.

Advertisements

With Trump set to take office later on January 20, he has pledged to impose high tariffs on major trade partners, including Mexico, Canada, and China. These policies could affect South Korean businesses operating in those regions. Economists are also concerned that South Korea may face trade restrictions from the U.S., especially after the country recorded a trade surplus with the U.S. of US$55.7 billion (S$76 billion) in 2024, an increase of 25.4 percent from 2023.

The Korea International Trade Association (KITA) predicts a slowdown in export growth to 1.8 percent in 2025, down from the 8.1 percent increase recorded in 2024. South Korea’s exports reached a record high of US$683.7 billion last year, driven in part by a 10.4 percent surge in sales to the U.S.

In addition to trade concerns, South Korea’s central bank revised its economic growth forecast for 2025 downward, projecting growth between 1.6 percent and 1.7 percent, lower than the 1.9 percent forecast made in November. The Bank of Korea attributed the downgrade to political instability, stemming from President Yoon Suk Yeol’s brief attempt to declare martial law in early December, and weakening domestic demand due to sluggish economic sentiment.

The political turbulence escalated after President Yoon’s military intervention in Parliament was rejected by lawmakers, leading to his impeachment and an ongoing criminal investigation on charges of insurrection. His arrest, followed by the violent protests of his supporters in mid-January, added to the uncertainty.

Advertisements

The Bank of Korea also pointed to the tragic crash of a Jeju Air Boeing 737-800 on December 29, which killed 179 people at Muan airport, as a factor further dampening the nation’s economic mood. This disaster, along with the political turmoil, led to declines in domestic consumption and construction investment, contributing to a growth slowdown in the fourth quarter of 2024.

Looking ahead, South Korea’s economic recovery will largely depend on the resolution of political instability, government stimulus efforts, and the economic policies of the new U.S. administration.

Related topics

Advertisements

You may also like

blank

Bedgut is a comprehensive insurance portal. The main columns include commercial insurance, auto insurance, health insurance, home insurance, travel insurance, other insurance, insurance knowledge, insurance news, etc.

[Contact us: [email protected]]

© 2023 Copyright  bedgut.com