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Turning the tariff deal with the U.S. into an economic gain

Published: 19 Nov. 2025, 00:04

Kim Seung-ho

The author is a visiting professor at Hallym University and former Director General for Trade Strategy at the Ministry of Trade, Industry and Energy.

Korea and the United States have concluded their tariff negotiations. Under the agreement, Korea will invest $200 billion in cash over 10 years, at a maximum of $20 billion a year, and channel an additional $150 billion into U.S. shipbuilding. In return, Washington will lower its tariff on Korean exports from 25 percent to 15 percent.

Korea had enjoyed duty-free access under the bilateral FTA. Restoring only part of that benefit in exchange for massive investment is difficult to interpret as anything other than a demand for ransom. The tariff reduction does not even return to the level guaranteed under the FTA. Korea accepts these terms because there is no realistic alternative. The situation feels closer to a bitter remedy than a negotiated gain.

President Lee Jae Myung, center, speaks at a press conference announcing the conclusion of a joint fact sheet with the United States at the Yongsan presidential office in central Seoul on Nov. 14, flanked by National Security Adviser Wi Sung-lac, right, and Kim Yong-beom, presidential chief of staff for policy. [JOINT PRESS CORPS]

Korea also cannot freely choose where its investments go. Losses will fall on the Korean side while profits will be shared with the United States, which contributes no capital of its own. The terms are hard to explain, yet expecting a better outcome was not realistic. What remains is to ensure that this bitter medicine produces long-term benefits.

The investment program will unfold over more than two decades. Korea must prepare now for the outcome it hopes to see when the long game ends.

Disputes over how the investment funds will be used will likely become a recurring feature of Korea-U. S. economic relations. Washington will want to allocate Korean capital to projects that yield lower returns but advance U.S. strategic priorities. Korean officials must challenge these attempts and push back. The government should accept, and even encourage, friction in the management of the funds. Even if the disputes create tension in the bilateral relationship, Seoul must be willing to absorb the strain.

The $350 billion must be divided among many individual programs. Here, details matter. Korea needs a robust system to evaluate investment destinations and assess progress on each project so that Korean public funds are not wasted. Relying solely on the diligence of individual officials is not enough. Given the scale and duration of the commitment, Korea needs a dedicated institution with professional capacity and clear responsibility.

That institution must report regularly to the National Assembly. It should disclose investment inflows and recoveries with full transparency. A mechanism for holding decision-makers accountable is also necessary. The proposed “U.S. Investment Act” should include a clause allowing the institution to delay or suspend investments when needed.

Korea must use this investment to reinforce the economic, industrial and security foundations of the alliance. The goal should be deep interdependence. Investment funds should be used to promote joint ventures or vertical and horizontal linkages between Korean and U.S. firms. Shared research and technology development would strengthen mutual reliance. Only when the two economies and industries are woven tightly together will the alliance remain stable regardless of political changes.

Korea should also treat the investment commitment as leverage. Tying annual investment amounts to the size of Korea’s trade surplus with the United States is one option. Seoul could use the logic that export earnings are necessary to finance the investment to push for further tariff reductions, restoration of FTA benefits and U.S. sourcing of Korean-made equipment for American projects.

Korea will also need new markets to offset reduced competitiveness in the United States caused by higher tariffs. It should press Washington for flexibility as Korea pursues trade diversification. That includes expanding trade with China, advancing a Korea-Japan-China FTA, and seeking membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership. Korea must secure U.S. understanding for these moves.

This situation also calls for a revision of Korea’s approach to economic security, which has focused heavily on guarding against supply chain risks in China. The United States is implementing economic security policies to contain China, but Korea should not automatically follow that path. With tens of billions of dollars flowing out to the United States every year, the Korean economy will remain vulnerable to financial shocks.

Korea’s last three major crises — the 1997 IMF bailout, the 2008 global financial crisis and the current tariff shock — all originated in financial instability, largely related to the U.S., and not supply chain breakdowns. The Chinese market remains essential for compensating the expected decline in Korea’s exports to the United States. Korea must maintain and expand access to China while preparing for possible U.S.-driven financial volatility.

This $350 billion represents the labor and sacrifice of the Korean people. At home, such funding could have solved a wide range of national challenges. Korea chose instead to weather the immediate storm. The task now is to ensure that the money, even after flowing through the U.S. economy, becomes a platform for strengthening Korea’s economic base and the Korea-U. S. relationship. That is the long-term responsibility that follows the tariff agreement.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.