SEOUL, April 9, 2025 (BSS/AFP) - South Korea on Wednesday unveiled a $2 billion emergency support package for its crucial export-focused carmakers, warning US President Donald Trump's 25 percent tariffs on the sector could be a "significant blow".

"Given that automobiles and auto parts are South Korea's top exports to the US, the decision to impose a 25 percent tariff on these items is expected to deliver a significant blow to our auto industry," the government said in a statement announcing the support measures.

Last week, Trump announced sweeping and punitive tariffs against the United States' biggest trading partners, the most severe of which are due to come into force on Wednesday.

Goods from South Korea are set to be taxed at 25 percent.

Trump also imposed steep tariffs on foreign-made cars sold in the United States, raising concerns over the global economic outlook and leaving Asia's fourth-largest economy scrambling to respond.

After industry consultation, Seoul has decided to introduce "a set of industrial safety net measures centred on the most urgent demands," it said.

The government has also "pledged to take flexible action depending on the level of industry damage going forward."

South Korea's auto-related exports to the US totalled $42.9 billion last year, according to officials.

Under the plan, the government will expand its low-cost financing programme for the auto industry by two trillion won ($1.34 billion USD).

Hyundai Motor, South Korea's largest automaker, will also establish a one trillion won support programme for domestic auto firms in partnership with major financial institutions.

Companies affected by the tariffs will be eligible for tax deferrals of up to nine months, the government added.

"The importance of the domestic market is being highlighted as a way to respond to reduced export volumes caused by US tariffs and to maintain the country's manufacturing base," the government said in a statement.

"To this end, the government will operate an electric vehicle subsidy system linked to manufacturers' discount amounts from the first half of this year through the end of the year," it said.

Seoul will also "significantly expand the government matching support ratio from the current 20-40 percent to 30-80 percent."

Trump spoke to South Korea's acting president on tariffs Tuesday.

The tariffs announcement has rocked global stock markets, with investors uncertain over whether they are a negotiating tactic or permanent US position.

Trump has insisted he will not back down until he has reduced or even wiped out US trade deficits -- while simultaneously signalling that he is ready to negotiate with countries around the world.

In 2024, the US trade deficit with South Korea amounted to just over $66 billion in goods.