🚨 Companies and Government Talk About Tariff Problems: Asking for Tax Help and Direct Cash Support

Today Korean Economic News | 2025.07.10

📌 Major Companies Ask Government for Help with Tariffs…"We Promise to Make Trade and Economic Security Policies"

💬 The National Planning Committee held a meeting with leaders from major companies like Samsung Electronics, Hyundai Motor, and LG Energy Solution to discuss how to handle high US tariffs. Companies asked for more tax support and a direct cash refund system as their main requests. Battery companies especially asked for system changes so they can get benefits even when they are losing money. Car, shipbuilding, petrochemical, and steel industries all complained about tariff costs and business problems, asking for strong government support. The government said it will carefully create trade and economic security policies based on what companies suggested.

1️⃣ Easy to Understand

Major Korean companies that are having trouble because of high US tariffs met with the government to discuss solutions. Companies asked for specific support plans, and the government promised to make policies based on these ideas.

First, let me explain what a "tariff" is in simple terms. A tariff is a tax on goods coming from other countries. For example, if Korea makes a car and exports it to the US, and the US government puts a 25% tariff on that car, buyers have to pay 25% more than the original price. This makes Korean cars more expensive in the US, so they become less competitive.

Recently, the US has been putting high tariffs on Korean products, making it very hard for our companies. So the National Planning Committee called leaders from big companies like Samsung Electronics, Hyundai Motor, and LG Energy Solution to hold a meeting.

The thing companies asked for most strongly was a "direct refund system." Right now, companies can only get tax benefits if they pay a lot of taxes. But battery companies like LG Energy Solution are losing money because of huge investments, so they don't pay much tax. They want the government to create a system that gives cash directly to companies like this so they can also get government support.

The car industry said they built factories in the US and increased local investment, but tariff costs are still very high. Shipbuilding and defense industries asked for government diplomatic cooperation to increase exports. Petrochemical and steel industries complained they are suffering double trouble from economic recession plus tariff costs.

The government promised to carefully review these company suggestions and create policies that can really help.

This meeting can be seen as the starting point for government and companies working together to respond to external economic crisis.

2️⃣ Economic Terms

📕 Tariff

A tariff is a tax on goods imported from other countries.

• It is used to protect domestic industries or improve trade balance.
• The higher the tariff rate, the more expensive imported goods become and the less competitive they are.
• Recently the US put 25% high tariffs on Korean products, making it hard for our companies.

📕 Direct Refund System

A direct refund system is when the government gives cash support to companies even if they didn't pay taxes.

• Right now, only companies that paid a lot of taxes can get tax benefits.
• This would let companies losing money or companies with low tax burden from big investments also get support.
• It is expected to encourage investment in future industries like batteries and semiconductors.

📕 Trade Policy

Trade policy is government policy that manages trade relationships with other countries.

• It includes tariff negotiations, free trade agreements (FTAs), and solving trade disputes.
• The main goal is to help domestic companies expand overseas and increase exports.
• Recently, economic security aspects are also considered important.

📕 Economic Security

Economic security is a policy area that protects a country's economic interests and safety.

• It includes preventing core technology leaks, securing supply chain stability, and securing strategic resources.
• Economic security has become more important as US-China conflicts get worse.
• It is especially important in high-tech fields like semiconductors and batteries.

3️⃣ How It Works and Economic Outlook

✅ How High Tariffs Affect Korean Companies

• Let's analyze the specific effects of US tariff policy on our major industries.

  • First, the car industry is getting hit most directly. Hyundai Motor and Kia sell 1.8 million cars per year in the US market as major car makers. If a 25% tariff is put on them, a $50,000 car would cost an extra $12,500. This would make consumer prices much higher and lead to fewer sales. Hyundai Motor Group operates factories in Alabama and Georgia, but they still import a lot from Korea, so tariff costs are high. Especially the luxury Genesis brand is mostly made in Korea and exported, so the damage is expected to be bigger.

  • Second, semiconductor and battery industries also face serious challenges. Samsung Electronics and SK Hynix are ranked 1st and 2nd in the world for memory semiconductors, but they are having trouble because of US tariffs and technology regulations. Especially if export limits to China plus US tariffs are both applied, it will hurt global competitiveness a lot. Battery companies like LG Energy Solution and Samsung SDI are making big investments in the US, but they worry that tariffs might apply to materials and parts they get from Korea. These companies are currently losing money and can't get proper tax benefits, so they have double trouble.

  • Third, steel and petrochemical industries have tariff costs added to business problems. POSCO and Hyundai Steel are already having trouble because global steel demand decreased and they compete with cheap Chinese products, but US tariffs are making profits even worse. The petrochemical industry also has triple trouble with rising oil prices, competition from cheap Middle East products, and now US tariffs. These industries need large facility investments because of their characteristics, so it's hard to move production bases quickly.

• Tariff charges are not just cost increases but a fundamental challenge to our companies' global competitiveness and long-term strategy.

✅ Effects and Limits of Support Policies Companies Asked For

• Let's look at whether the specific support plans companies asked for can work and what effects they would have.

  • First, introducing a direct refund system is innovative but costs the government a lot of money. Korea's current tax support only gives benefits to companies that paid corporate or income tax. But companies like LG Energy Solution that are losing money from big investments can't get these benefits. If a direct refund system starts, these companies could also get cash support and have much more money to invest. The US IRA (Inflation Reduction Act) also supports clean energy companies in a similar way. But if this system starts, government spending could increase a lot, so it needs careful review.

  • Second, expanding tax support has immediate effects but is not a fundamental solution. The R&D tax credit expansion and investment tax credit increases that companies asked for are policies that can be implemented relatively quickly. If this support expands, companies' investment costs would decrease and it would help strengthen competitiveness. But there are limits as long as the fundamental problem of tariffs is not solved. Also, too much tax support could decrease government tax income and limit other policy implementation. So the support size and targets need to be set carefully.

  • Third, trade negotiations and diplomatic efforts are the most fundamental solution. No matter how much domestic support increases, fundamental solutions are hard without removing tariffs themselves. The government should pursue tariff reductions through Korea-US FTA renegotiation or bilateral discussions. It's also important to respond to protectionism through WTO complaints or multilateral cooperation. The export support that shipbuilding industries asked for would also be most effective when government diplomatic networks and financial support are combined. But these diplomatic efforts take a long time and have limits because success cannot be guaranteed.

• Company support policies have short-term buffer effects, but long-term trade negotiations and strengthening industrial competitiveness are more important tasks.

✅ Korea's Response Strategy and Future Tasks

• Let's look for structural response plans and long-term development strategies for tariff pressure.

  • First, reducing dependence on the US through export market diversification is urgent. Korea's current export share to the US is about 15% of the total, second after China. To reduce US tariff risks, exports must expand to emerging markets like India, ASEAN, Middle East, and Africa. Especially India is a promising market with high economic growth and large population. The government should help companies diversify markets through expanding FTAs with these regions, export financial support, and overseas expansion consulting. However, developing new markets takes a lot of time and money, so short-term results are hard to expect.

  • Second, strengthening localization strategies through supply chain reorganization is needed. The most certain way to avoid tariffs is to produce locally. Representative examples are Hyundai Motor building factories in the US and India, and Samsung Electronics building a semiconductor factory in Texas. LG Energy Solution is also building several factories in the US. But localization requires huge initial investment and has difficulties like building parts supply chains and securing workers. Also, the risk of technology leaks from transferring core technology overseas must be considered. The government should expand financial support and tax benefits for overseas investment while also preparing technology protection measures.

  • Third, fundamental improvements through strengthening future industry competitiveness is important. Tariffs might be a temporary problem, but long-term technological competitiveness is needed to survive in any situation. Especially competitive advantages must be secured in new technology fields like AI, bio, aerospace, and quantum computing. The government should expand R&D investment, ease regulations, and work on talent development. Building an innovation ecosystem where large companies, small companies, research institutes, and universities cooperate is also important. If these efforts bear fruit, an economic structure that doesn't shake even with external pressure like tariffs can be created.

• Tariff response needs balanced implementation of short-term measures and long-term strategies, with especially more attention and investment needed in structural competitiveness strengthening.

4️⃣ In Conclusion

This government-company meeting is a meaningful first step where public and private sectors looked for response plans together in the crisis situation of high US tariffs. The direct refund system and expanded tax support that companies suggested are evaluated as realistic and specific policy ideas.

Especially the direct refund system is an innovative system that would give real help to future industry companies making large investments even while losing money. This is similar to the US IRA and can be called an essential policy tool to not fall behind in global competition.

But domestic support policies alone have limits. To solve the fundamental problem of tariffs, trade negotiations and diplomatic efforts must be carried out together. The government should actively pursue negotiations for tariff removal or reduction using Korea-US dialogue channels.

More importantly, structural responses from a long-term perspective are needed. An economic structure that doesn't shake from specific countries' policy changes must be created through export market diversification, localization strategies, and strengthening future industry competitiveness. This cannot be done overnight, but if we don't start preparing now, situations vulnerable to external shocks will keep repeating.

Companies should also focus more on strengthening their own competitiveness rather than just depending on government support. It's important to secure differentiated competitive advantages beyond price competitiveness through technology innovation, quality improvement, and brand value enhancement.

In the end, using this crisis as an opportunity to strengthen Korea's economic structure even more and building a solid foundation that doesn't shake from any external environment changes can be called true success.