S. Korea's government plans to provide 25 tln won in liquidity to help exporters amid global trade war

Under the extra budget bill, the government proposed expanding the size of special policy funds by 1.5 trillion won to a total of 25 trillion won to prevent a possible liquidity crisis of Korean companies amid heightened global trade uncertainties, according to the Ministry of Economy and Finance.

The government unveiled the details of the envisioned 12.2 trillion-won supplementary budget earlier in the day, highlighting the need to support key industries amid the escalating trade war, as well as recovery efforts following recent wildfires in the country's southeastern region.

Among the 12.2 trillion won, the government plans to spend 4.4 trillion won on mitigating trade risks and supporting advanced industries.

In detail, the 25 trillion-won policy financing scheme includes low-interest loans worth 15 trillion won for companies hit by U.S. reciprocal tariffs and 10.2 trillion won of surety insurance for the shipbuilding and other export industries.

The Seoul government is currently preparing for its negotiations with the Donald Trump administration, slated for next week, on U.S. import tariffs that include a 25 percent reciprocal duty for South Korea.

Additionally, the government plans to double its annual spending to 400 billion won on stabilizing the supply chains of six critical minerals, including rare earth minerals, such as lithium and molybdenum, that are expected to suffer supply disruptions due to China's export controls.

Earlier this month, China placed export restrictions on key rare earth elements, essential for advanced industries, in retaliation against Washington's hefty tariffs.

The government is also planning to raise the issuance cap of foreign exchange stabilization bonds from US$1.2 billion to $3.5 billion to better respond to heightened volatility in the foreign exchange market.

To boost the country's competitiveness in artificial intelligence (AI), the government allocated 1.8 trillion won to purchasing advanced graphic processing units (GPUs), developing global-level large language models (LLMs) and annually fostering more than 3,300 personnel with masters' or doctorate degrees in related fields.

To this end, the size of the AI innovation fund will be expanded to 200 billion won from the current 90 billion won, while 10 billion won will be provided to 50 companies conducting research and development projects.

Another 500 billion won has been set aside to help boost the competitiveness of the semiconductor and other strategic industries.

It was reported earlier, Trump orders critical mineral review as China faces 245% tariff.