2600 Companies in Vietnam
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South Korea Prepares Financial aid as US Tariffs Threaten Vietnam Investments
Table of Contents
- South Korea Prepares Financial aid as US Tariffs Threaten Vietnam Investments
- Auto Industry Faces Potential export Decline
- Government Intervention and Financial Support
- Expanding Support to Other Sectors
- Korean companies in Vietnam at Risk
- Uncertainty in US-Vietnam Trade Relations
- Potential Economic Impact
- Financial Support Measures Under Consideration
- Exploring Further Options
- South korea Responds to U.S. Tariffs: A Q&A on Financial Aid and Vietnam Investments
- What’s happening with South Korea and U.S. tariffs?
- Why is South Korea worried about U.S. tariffs?
- How could these tariffs affect South Korea’s economy?
- What is the South Korean government doing to address this issue?
- Why is Vietnam so important in this context?
- Which South Korean companies are most at risk in Vietnam?
- What are the potential consequences for these companies?
- Where does President Trump stand on tariffs with Vietnam?
- What financial support measures are being considered?
SEOUL, South Korea (april 6, 2025) – South Korea is considering a multi-billion won emergency financial package to support its automotive industry adn other sectors perhaps impacted by rising U.S. tariffs,notably those affecting Korean companies operating in Vietnam.
Auto Industry Faces Potential export Decline
Last year, South Korea’s auto parts exports to the U.S. reached a record $82.22 billion, representing 36.5% of the country’s total car parts exports. A 25% tariff imposed by the U.S. could prove detrimental, with the IBK Economic Research Institute estimating a potential 18.59% year-on-year drop in Korean exports to the U.S.
Government Intervention and Financial Support
In response, the South Korean government has earmarked 3 trillion won for emergency policy financing for the automotive industry. “There were a lot of requests to expand emergency policy funds after the Donald Trump administration’s tariff,” said a senior government official, adding that the government is considering expanding the liquidity supply programme.
Expanding Support to Other Sectors
The government is also considering extending support to other industries vulnerable to U.S. tariffs, including steel and aluminum. Special attention is being paid to South Korean companies with operations in Vietnam, a country facing potential tariffs from the U.S.
A senior official with financial authorities noted the need to examine Korean firms in Vietnam, particularly those affected by the U.S.’s 46% mutual tariffs on automobiles. The official also raised concerns that chinese companies,facing 34% mutual tariffs,could flood the Korean market,necessitating broader industry support beyond just automobiles and steel.
Korean companies in Vietnam at Risk
Approximately 2,602 Korean companies have established operations in Vietnam. Samsung Electronics, for example, produces an estimated 40-50% of its smartphones in Vietnam, with a meaningful portion exported to the U.S. and Europe. LG Electronics also has a major presence in Hai phong City.
Other major South Korean companies with production subsidiaries in Vietnam include Samsung Electro-Mechanics, which produces high-tech semiconductor substrates and camera modules, and LG Innotek, which manufactures camera modules. The Hyosung group, Hanse Real, Youngwon Trade, and Taekwang Unemployment also have a presence in the country.
These companies face the prospect of rising prices, shrinking demand, reduced product shipments, and declining profitability due to high U.S. tariffs. A Vietnamese company official stated that the Trump administration’s tariff policies were unexpected.
Uncertainty in US-Vietnam Trade Relations
Despite President Trump’s suggestion that Vietnam wants to reduce tariffs to zero, analysts remain cautious, emphasizing the unpredictability of future negotiations. The government is preparing for a worst-case scenario, considering ample financial aid for suppliers in Vietnam, encompassing sectors like semiconductors and smartphones, in addition to the automotive industry.
Potential Economic Impact
According to Citi, a 25% tariff on Korean automobiles, parts, pharmaceuticals, and semiconductors could decrease South Korea’s gross domestic product (GDP) by 0.203%. The government is prioritizing preemptive financial support due to the potential ripple effect on the broader economy.
Financial Support Measures Under Consideration
Financial authorities are exploring measures to support affected companies, including lowering loan rates by 1 percentage point and increasing funding by approximately 10%. They are also examining ways to ease regulations on equity ratio requirements based on the Bank for International Settlements (BIS) for export SME loans. This could lead to increased lending from major commercial banks, including KB Kookmin, Shinhan, Hana, Woori, and NH Nonghyup.
Exploring Further Options
Authorities are also considering excluding the risk of overseas subsidiaries from the calculation of risk-weighted assets (RWA) and removing the risk of foreign corporate retained earnings when calculating RWA. these measures could enable banks to increase loans to local subsidiaries, including those in Vietnam. The government also intends to expedite the raising of advanced strategic industry funds with banks, targeting up to 100 trillion won.
The Korea Development Bank
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South korea Responds to U.S. Tariffs: A Q&A on Financial Aid and Vietnam Investments
What’s happening with South Korea and U.S. tariffs?
South Korea is preparing a significant financial aid package in response to potential U.S. tariffs, notably those that could impact south Korean companies operating in vietnam. The government is concerned about the potential damage to industries like automotive, steel, and those involved in high-tech manufacturing.
Why is South Korea worried about U.S. tariffs?
The primary concern is the potential impact on South Korean exports to the U.S., especially auto parts. In the previous year, auto parts exports reached a record $82.22 billion, representing 36.5% of the country’s total car parts exports. A 25% tariff could substantially reduce these exports.
How could these tariffs affect South Korea’s economy?
According to the IBK Economic Research Institute,a 25% tariff could lead to an 18.59% drop in Korean exports to the U.S. Citi estimates that a 25% tariff on automobiles, their parts, pharmaceuticals, and semiconductors could decrease South Korea’s gross domestic product (GDP) by 0.203%. The government is worried about a ripple effect on the broader economy.
What is the South Korean government doing to address this issue?
The South Korean government is taking several steps, including:
- earmarking 3 trillion won for emergency policy financing for the automotive industry.
- Considering expanding the liquidity supply program.
- Extending support to other industries vulnerable to tariffs, like steel and aluminum.
- Examining the situation of South Korean companies operating in Vietnam.
- Exploring measures with financial authorities to support affected companies (loan rates, funding, etc.).
- expediting fundraising for advanced strategic industry funds with banks.
Why is Vietnam so important in this context?
A significant number of South Korean companies have invested heavily in Vietnam. approximately 2,602 Korean companies operate there, with major players like Samsung Electronics and LG Electronics having considerable production facilities. These companies are exposed to potential tariffs imposed by the U.S. on goods imported from Vietnam.
Which South Korean companies are most at risk in Vietnam?
Several major South Korean companies have a significant presence in Vietnam, including:
- Samsung Electronics
- LG Electronics
- Samsung electro-Mechanics
- LG Innotek
- Hyosung group
- Hanse Real
- Youngwon Trade
- Taekwang Unemployment
What are the potential consequences for these companies?
These companies face potential consequences such as:
- Rising prices
- Shrinking demand
- Reduced product shipments
- Declining profitability
Where does President Trump stand on tariffs with Vietnam?
The original article stated that President Trump suggested Vietnam wanted to reduce tariffs to zero. Though, analysts remain cautious due to the unpredictability of future trade negotiations and the constant shifting of trade policies.
What financial support measures are being considered?
Financial authorities are looking at several options, including:
- Lowering loan rates by 1 percentage point.
- Increasing funding by approximately 10%.
- Easing regulations on equity ratio requirements based on the Bank for International Settlements (BIS) for export SME loans.
- Excluding the risk of overseas subsidiaries from the calculation of risk-weighted assets (RWA).
- Removing the risk of foreign corporate retained earnings when