Korea unveils W360tr trade fund to cushion slide in exports

South Korea will provide its most-ever trade financing of 360 trillion won ($245 billion) to shore up lackluster export performances expected this year amid increasing uncertainties in the global trade landscape.

The government will seek to cement global leadership in the semiconductors industry by increasing the investment tax credit deduction rate for chip companies and offering 14 trillion won in low-interest policy financing.

“Export growth will slow due to intensifying competition in key industries such as semiconductors and downside factors resulting from the change in US trade policies,” the Ministry of Economy and Finance said in a statement, while unveiling the government’s 2025 Economic Policy Direction, Thursday.

Exports, which account for nearly 40 percent of the Korean economy, are expected to grow 1.5 percent in 2025, significantly less than last year's 8.2 percent.

In 2024, outbound shipping continued to increase rapidly until the third quarter thanks to a boom in semiconductors, but the growth slowed in the fourth quarter due to fierce competition in key industries.

The recent decline in oil prices and production disruptions due to strikes are also limiting the growth of exports, especially petroleum products and automobiles. The government is concerned that although positive trends in high-performance chips and shipbuilding will be maintained this year, exports products such as general-purpose semiconductors and petrochemicals will slow down.

A set of industrial and trade measures drawn up by the government in the 2025 Economic Policy Direction centered on increasing trade finance to diversifying exports and resolving difficulties of domestic companies so that they can ride out the rapidly changing global economic environment this year.

The 360 trillion won in trade financing earmarked for this year is the most ever -- an increase of 5 trillion won from last year. The size of the special financing program for receiving large-scale orders was notably increased from 86 trillion won to 95 trillion won.

The tax support package, including the extension of the corporate tax payment deadline for small and medium-sized enterprises in export businesses, early value-added tax refunds and exclusion from regular tax audits, will also be extended by one year.

The government will also closely coordinate with national shipping companies to diversify maritime logistics routes.

Joint logistics centers currently installed in the Netherlands, Spain, Indonesia and the West Coast of the United States will be joined by three more sites in the US, Eastern Europe and other emerging markets. A public-private joint task force for Korean logistics will be launched to establish a mid- to long-term logistics supply chain master plan.

In response to intensifying global industry competition, government support for major export growth engines like semiconductors, rechargeable batteries, electric vehicles, high value-added shipbuilding and steelmaking will be further tailored to the needs of each industry.

To secure global leadership in the chips industry, which accounts for about 20 percent of Korea’s total exports, authorities will support the enactment of a special semiconductor law and specify additional financial and tax support measures for infrastructure and research and development.

The government will share more than half of the company's share of the costs for undergrounding transmission lines to secure the power needed for the Yongin-Pyeongtaek semiconductor cluster, a planned industrial complex in Gyeonggi Province that will be part of the world's largest semiconductors megacluster, while it will construct related infrastructure such as for water and roads in a swift manner.

As secondary battery manufacturers are expected to see a reduction in benefits from the US Inflation Reduction Act with the upcoming administration of US President-elect Donald Trump, a trade response system with the US will be established to mitigate the effects of US policy changes. Government subsidies for industrial infrastructure will be increased.

For the automobile sector, the number of charging stations for electric and hydrogen vehicles will grow to 95,000 and 68 in 2025, respectively.

The shipbuilding industry will respond to the growing demand for maintenance, repair and overhaul, or MRO, services. To encourage support for MRO orders, such as for warships in which the US and other countries are interested, preferential financing will be provided, while the verification of ammonia bunkering ship equipment will be promoted.