Despite the high tariffs imposed during the second Trump administration, South Korea’s exports in the first half of the year remained robust, totaling USD 334.7 billion, a figure similar to the same period last year. Buoyed by growing demand for AI and data centers, semiconductor exports reached a record high, serving as a key pillar of the economy. While the auto sector was hit hard by the 25% tariffs, the popularity of hybrid vehicles helped mitigate the decline in exports. However, in the second half, factors such as U.S. tariff negotiations, IT demand, and oil prices may worsen export conditions due to rising uncertainty.

The government has earmarked KRW 179.3 billion in supplementary funding with the goal of positioning South Korea among the world’s top three AI powers. The Ministry of Science and ICT plans to invest KRW 65.6 billion in AI projects in the public, medical, and manufacturing sectors; KRW 30 billion in advanced AI semiconductors (NPUs); and KRW 33.7 billion in information security and AI talent development. In addition, a new KRW 50 billion AI innovation fund will be established to further support industrial and commercial applications.

The Lee Jae Myung administration has unveiled its new economic policy under the banner of “Real Growth.” The vision includes placing Korea among the world’s top 3 AI powers, achieving 3% potential growth, and positioning Korea as one of the world’s top 5 economic powers. AI is the central growth engine to boost real GDP growth by 1-2% and potential growth by up to 3%. The government has identified 30 flagship AI transformation and ultra-innovation projects, to be launched in the second half of the year. A KRW 210 trillion supplementary budget will be invested over the next five years in support of the strategy.

The National Assembly has passed the so-called “Yellow Envelope Law” (amendments to Articles 2 and 3 of the Trade Union and Labor Relations Adjustment Act) with 183 out of 186 members in attendance voting in favor. The amendment includes provisions to expand the legal definition of “employer” to include principal employers in subcontracted or indirect employment arrangements, and limit damage claims against unions for legitimate strike actions. The law will go into effect six months after promulgation.

The Bank of Korea kept its base interest rate unchanged at 2.50%, signaling a continued cautious stance on monetary policy. Although the government’s household debt measures announced on June 27 have somewhat cooled the real estate market, lingering instability in Seoul prompted a prudent approach. The central bank also raised its 2025 GDP growth forecast for Korea from 0.8% to 0.9%.

The Lee Jae Myung administration unveiled a KRW 728 trillion national budget for next year, marking a KRW 54.7 trillion increase from this year and an 8.1% growth in total government spending. The budget prioritizes countermeasures for economic slowdown, low birthrates, population aging, and AI-led transformation. The AI budget has been tripled to KRW 10.1 trillion, while the R&D budget has been increased by 19.3% to KRW 35.3 trillion.

To enhance global competitiveness in emerging sectors such as AI, autonomous driving, and robotics, the Korean government has announced major regulatory reforms. At the first Strategic Meeting on Core Regulatory Reform, key topics included regulatory overhaul in AI and robotics and measures to support corporate growth. The initiative aims to dismantle bureaucratic silos and conflicts of interest that have hindered innovation, with a broader goal of fostering a forward-looking industrial ecosystem. Plans include relaxing data usage constraints under the Personal Information Protection Act and expanding zones for autonomous vehicle testing. These efforts are part of a broader strategy to elevate Korea to AI G3 status while also accelerating corporate growth and reforming restrictive regulations on businesses.