South Korea’s Policy Adjustments Under Trump 2.0

 Under the second Trump administration, South Korea's trade and industrial policies have undergone significant recalibrations, characterized by high-stakes negotiations, massive investment commitments, and a "new normal" of transactional diplomacy.

The Trade Impasse and the $350 Billion Deal

South Korea initially faced severe trade pressure, becoming one of the FTA partners with the highest tariff rates. It was hit with 26 percent reciprocal tariffs on top of a 10 percent baseline, alongside 25 percent tariffs specifically on steel, automobiles, and auto parts.

To secure a reduction of these reciprocal and auto tariffs to 15 percent, South Korea agreed to a monumental US demand: investing US$350 billion in the United States. Key details of this agreement include:

• Scale: This amount exceeds South Korea’s combined foreign direct investment (FDI) from 2020 to 2024.
• Terms: The US retains the right to decide the investment sectors and will keep 90 percent of the profits within its borders.
• Sectoral Allocation: US$150 billion is dedicated to the shipbuilding sector, with the remaining US$200 billion allocated to other manufacturing at an annual rate of US$20 billion.
• Specific Pledges: Hyundai alone raised its planned US investment from US$21 billion to US$26 billion, covering steel, future industries, and the automotive sector.

Industrial "Renaissance" and Strategic Cooperation

South Korea is positioning itself as a vital partner in the US effort to bring about a "renaissance" in domestic manufacturing. This cooperation is particularly visible in three sectors:

• Shipbuilding: Under the "Make American Shipbuilding Great Again" (MASGA) initiative, the US is relying on South Korean giants like Hanwha Ocean, HD Hyundai, and Samsung Heavy Industries for technology and expertise. In return for these investments, South Korea received a long-sought "return gift": US approval to build a nuclear attack submarine.
• Semiconductors: Seoul secured guarantees for the semiconductor sector to maintain parity with global players like Taiwan, although recent US-Taiwan deals have cast doubt on South Korea's long-term edge.
• Diversification: To mitigate risks from US trade arbitrariness and declining exports to China, South Korea is attempting to diversify its trade towards OECD countries, India, and Southeast Asia.

Tech and Non-Tariff Barriers

A major point of friction involves South Korea's regulation of "Big Tech." The Trump administration perceives South Korean antitrust efforts, such as the Online Platform Monopoly Prohibition (OPMP) Act, as non-tariff barriers designed to target US companies.

• Regulatory Conflict: US pressure led President Lee Jae Myung to put certain digital service rules on hold or water them down to avoid friction in bilateral ties.
• Data and Security: A massive data breach at the US-registered retailer Coupang in November 2025 further strained relations when the company lobbied the US government to pressure South Korea to cease its probe.

The Context of Uncertainty

Despite reaching a final trade deal in October 2025, uncertainty remains a constant. President Trump has continued to use the threat of increasing tariffs (returning them to 25 percent) as a tactic to pressure the South Korean national assembly to formalize agreements. Furthermore, domestic US issues, such as ICE raids at Hyundai and LG battery plants, have impacted the mobility of South Korean workers and eroded public trust, with 80 percent of South Koreans expressing distrust due to the administration's global trade policies.

 Under the second Trump administration, technology regulation and antitrust enforcement have emerged as significant "non-tariff barriers" that the United States uses as leverage in its transactional relationship with South Korea. While South Korea has attempted to regulate Big Tech to ensure fair competition, these efforts have faced intense pushback from a U.S. administration that views such rules as targeted attacks on American companies.

The Regulatory Clash: OPMP Act

The primary source of friction is South Korea’s proposed Online Platform Monopoly Prohibition (OPMP) Act.

• South Korea's Intent: The government maintains that the act is necessary to promote innovation and market competitiveness by preventing tech giants from using market dominance to suppress competition.
• The U.S. Reaction: The Trump administration and U.S. digital service providers perceive the act as a non-tariff barrier. Reports suggest these competition-related policies could cost tech companies approximately US$525 billion, leading the U.S. to exert "intense pressure" on the South Korean administration.
• Outcome: Fearing that the issue would create critical friction in bilateral ties, President Lee Jae Myung put the legislative policies on hold and eventually watered down the digital services rules. This marks a shift from previous U.S. administrations, which typically did not use antitrust matters as explicit negotiation tactics.

Fines and Ongoing Disputes

U.S. tech companies like Google and Apple have long had an "inimical relationship" with South Korea’s antitrust watchdog, the Free Trade Commission (FTC).

• Google: The FTC fined Google US$177 million in 2021 for blocking Android customization and US$32 million in 2023 for misusing its gaming platform.
• Apple and Google: Both companies have faced scrutiny over mandatory in-app payments and their insistence on exporting high-precision map data, both of which South Korea deems violations of its antitrust regulations.

The Coupang Data Breach and Network Acts

A November 2025 data breach at Coupang, South Korea’s largest online retailer, further strained tech relations. Although it operates in Korea, Coupang is U.S.-registered, and the company lobbied the U.S. government to pressure South Korea to cease its investigation into the leak of 34 million accounts.

• U.S. Threats: Following the passage of the Promotion of Information and Communications Network Utilisation and Protection Act in March 2026—which aimed to address deepfakes—U.S. officials, including Trade Representative Jamieson Greer, claimed the act was a sufficient reason for the U.S. to break its trade agreement with South Korea.

Strategic Adjustments

The Trump administration’s willingness to cancel trade meetings over tech regulations has forced South Korea into a defensive posture. In response to this "trade arbitrariness," South Korea's FTC has indicated that the country is exploring diversification towards OECD countries and other international organizations to reduce its export and regulatory dependence on the U.S.. Despite these attempts at autonomy, the broader policy under Trump 2.0 remains one where South Korean domestic tech regulations are often made subservient to the maintenance of the security and trade alliance.

Under the second Trump administration, foreign policy fractures between the United States and South Korea have widened significantly, driven by a radical shift in U.S. priorities toward an "isolationist" and transactional worldview. These fractures primarily manifest in three areas: differing perceptions of North Korea, divergent strategies regarding China, and the secondary impacts of U.S. unilateralism on South Korea's global interests.

The North Korea Priority Gap

The most stark fracture exists regarding North Korea’s nuclear program.

• Divergent Threat Perceptions: For South Korea, North Korea remains the top military threat, a view held by 90 percent of its citizens. Conversely, the Trump administration has largely downplayed the North Korean threat, omitting the country entirely from the 2025 National Security Strategy (NSS).
• Outsourcing Security: The U.S. now expects South Korea to handle the North Korean threat on its own, while simultaneously assisting the U.S. in broader Indo-Pacific security operations.

Strategic Divergence on China

While the U.S. has placed China at the center of its security strategy, South Korea does not view China as an existential threat.

• The "Strategic Entanglement" Risk: The U.S. seeks to use its military bases in South Korea (USFK) as launchpads for regional operations, including potential conflicts in the Taiwan Strait or South China Sea.
• South Korea's Balancing Act: South Korea is attempting to maintain a degree of strategic autonomy to avoid being pulled into conflicts unrelated to its immediate national security, fearing that aligning too closely with the U.S. "bandwagon" will alienate China and Russia and trigger a regional arms race.

Global Unilateralism and Secondary Fallout

South Korea’s status as a staunch U.S. ally has increasingly put its global economic and diplomatic interests in jeopardy due to U.S. unilateral actions.

• Retaliatory Damage: Past U.S. withdrawals from international agreements, such as the Iran nuclear deal (JCPOA), forced South Korea to freeze Iranian funds, leading to Iranian retaliation against South Korean products (e.g., Samsung) and the seizure of an oil tanker.
• The Rules-Based Order: The sources note that Trump’s actions often violate the international rules-based order, leaving South Korea’s silence to be perceived by other nations as an endorsement of illiberal behavior. This erodes South Korea's diplomatic standing and its ability to normalize ties with Russia or China.

Internal Policy Fractures: Alliance vs. Autonomy

The pressure from the Trump administration has split South Korean policymakers into two distinct camps:

• Alliance-First Camp: This group advocates for adjusting South Korean interests to accommodate the U.S. to ensure continued military and economic protection.
• Autonomy-First (South Korea First) Camp: This group advocates for cautious engagement, placing South Korean national interests at the center and questioning the long-term viability of an unpredictable alliance. This camp prioritizes the transfer of Wartime Operational Control (OPCON) to give Seoul full command over its military fate.

Burden Sharing and Strategic Flexibility

The transactional nature of the alliance is further strained by U.S. demands for massive increases in defense contributions. President Trump suggested South Korea's payment should rise from US$1.2 billion to US$10 billion annually. Additionally, the U.S. has pursued "strategic flexibility," which includes the potential for unilateral troop reductions—such as the reported shift of 4,500 troops in May 2025—without the traditional prior consultation with Seoul.

Under the second Trump administration, the U.S.-South Korea security alliance has entered a period of profound transition, shifting toward a transactional "modernization" that prioritizes burden-sharing and aligns with U.S. domestic industrial goals. While South Korea has secured significant strategic concessions, the alliance is increasingly defined by divergent threat perceptions and a new "Alliance First vs. Autonomy First" domestic debate.

The Burden-Sharing Impasse

A central pillar of "Trump 2.0" is the demand for significantly higher financial contributions from Seoul to maintain the U.S. Forces Korea (USFK).

• Special Measures Agreements (SMA): Despite a November 2024 agreement raising contributions for 2026–2030, President Trump publicly demanded an increase from US$1.2 billion to US$10 billion per year, labeling South Korea a "money machine".
• Strategic Flexibility: The administration has moved away from traditional consultative mechanisms regarding troop levels. In May 2025, reports surfaced that the U.S. intended to shift 4,500 troops from South Korea without prior consultation, reflecting a broader policy of "strategic flexibility" where the USFK could be used as a launchpad for regional operations, such as in the Taiwan Strait or South China Sea.

Divergent Security Priorities

The sources highlight a growing gap in how both nations perceive their primary security threats.

• The North Korea Gap: While 90 percent of South Koreans still view North Korea as their top military threat, the U.S. has notably downplayed this risk. The 2025 National Security Strategy (NSS) omitted North Korea entirely, signaling that the U.S. now expects Seoul to handle the North Korean threat independently while the U.S. focuses on China.
• The China Factor: The U.S. now places China at the center of the bilateral security conversation, pressuring Seoul to deter adversaries across the "first island chain". South Korea, however, seeks to maintain its strategic autonomy to avoid "strategic entrapment" in a conflict between the U.S. and China that does not directly involve its own interests.

Strategic Concessions and Shipbuilding

To maintain the alliance’s foundation, South Korea has leveraged its industrial strengths to provide the U.S. with strategic assistance.

• MASGA Initiative: South Korea is the primary contributor to the "Make American Shipbuilding Great Again" (MASGA) initiative, pledging US$150 billion to revive the U.S. merchant navy and naval fleet through partnerships with giants like Hanwha Ocean and HD Hyundai.
• The "Return Gift": In exchange for these massive industrial commitments and increased burden-sharing, Seoul secured long-standing demands, most notably U.S. approval to build a nuclear attack submarine and a commitment to the transition of Wartime Operational Control (OPCON) to South Korea.

The Domestic Policy Split

The pressure of Trump's "isolationist" and transactional worldview has split South Korean policymakers into two camps:

• Alliance-First Camp: Advocates for adjusting South Korean interests—including increased defense spending and closer alignment against China—to ensure the U.S. security umbrella remains intact.
• Autonomy-First Camp: Prioritizes South Korean interests, advocating for a "Plan B" that involves diversifying security partners and accelerating the OPCON transfer to take full command of the military and inter-Korean relations.

Ultimately, while South Korea has "doubled-down" on the alliance to secure short-term stability, the sources warn that this new template for partnership may carry long-term costs, including a regional arms race and the risk of South Korea's national interests being bartered in U.S. great-power negotiations.

Under the second Trump administration, shipbuilding cooperation has become a cornerstone of the "modernized" bilateral relationship, serving as both a strategic industrial bridge and a powerful tool for diplomatic leverage. Faced with a decaying domestic industry, the United States has turned to South Korea to spearhead the "Make American Shipbuilding Great Again" (MASGA) initiative.

The $150 Billion Commitment

As part of a broader $350 billion investment package intended to resolve trade impasses and lower tariffs, South Korea pledged US$150 billion exclusively to the U.S. shipbuilding sector. This strategic investment aims to revive the U.S. merchant navy and naval fleet while positioning South Korean firms deep within the U.S. defense industrial base.

The Role of the "Big Three" and Industry Leaders

The cooperation relies heavily on South Korea’s major shipbuilders to transfer expertise, technology, and skills to the U.S.. Key corporate actions include:

• Hanwha Ocean: Acquired the U.S.-based Philly Shipyard and committed US$5 billion to increase its capacity from building two vessels a year to 20 vessels a year, focusing on reviving the U.S. merchant navy.
• HD Hyundai: Partnered with Huntington Ingalls Industries to design and construct next-generation U.S. Naval ships and auxiliary fleets, while exploring joint investments in new U.S. facilities.
• Samsung Heavy Industries: Signed a memorandum of agreement with Vigor Marine Group to focus on the Maintenance, Repair, and Overhaul (MRO) of U.S. Navy support vessels.
• Specialized Repair: Smaller firms like HJ Shipbuilding, SK Oceanplant, and K Shipbuilding have been engaged for master ship repair and maintenance of U.S. battleships.

Strategic Leverage and "Return Gifts"

South Korea has successfully used its shipbuilding prowess as strategic leverage in broader trade and security negotiations.

• Trade Concessions: This cooperation was a primary factor in the July 2025 deal that lowered U.S. reciprocal and auto tariffs from 26 percent to 15 percent.
• Security Breakthroughs: In what the sources describe as a "return gift" for these massive investments, the U.S. granted South Korea a long-standing demand: approval to build a nuclear attack submarine.
• Expanded Reach: The agreement also included U.S. approval for South Korea to increase its stake in Austal, an Australian shipbuilding company.

Modernizing the Alliance

Beyond mere construction, the two nations have established a shipbuilding working group to collaborate on workforce development, shipyard modernization, and supply chain resilience. This cooperation is a central element of President Lee Jae Myung's strategy to "modernize" the alliance, making it more reciprocal and future-oriented. However, the sources note that while this provides short-term security and economic stability, it also risks "strategic entanglement," signaling to China and Russia that South Korea is firmly on the U.S. "bandwagon," which could trigger a regional arms race.

The second Trump administration has significantly altered South Korea’s domestic political landscape, fanning ideological polarization and sparking a fundamental debate over the country’s strategic future.

The Rise of "Make Korea Great Again" (MKGA)

Trump’s "Make America Great Again" (MAGA) ideology has found a direct parallel in South Korea’s right-wing opposition, the People Power Party (PPP).

• Ideological Adoption: Supporters of the controversial former president Yoon Suk Yeol (impeached in December 2024) have adopted the slogan "Make Korea Great Again (MKGA)".
• Political Tactics: This faction has increasingly used far-right talking points and conspiracy theories to discredit the ruling Democratic Party of Korea (DPK), including unfounded accusations of links to the Chinese Communist Party.
• Social Impact: The "bonhomie" between MAGA and MKGA proponents has brought U.S.-style debates on gender and immigration into the South Korean mainstream, further splitting the country along progressive and conservative lines.

Public Distrust and "Trade Arbitrariness"

The transactional nature of "Trump 2.0" has eroded the traditional emotional bond between the two nations, leading to widespread public skepticism.

• Distrust Levels: An EAI poll revealed that 80 percent of South Koreans expressed a deeply unfavorable attitude toward the U.S., primarily citing Trump’s global trade policies as the reason for their distrust.
• Specific Triggers: Domestic outrage was fueled by the ICE detention of 300 South Korean workers at a Hyundai/LG plant in Georgia and perceived U.S. interference in South Korean investigations, such as the Coupang data breach. The U.S. government's pressure on South Korea to cease its probe into Coupang generated significant counter-pressure on the Seoul administration.

The Strategic Split: Alliance vs. Autonomy

The unpredictable nature of the alliance under Trump has forced a split in the South Korean policy community into two distinct camps:

• Alliance-First Camp: This group advocates for adjusting South Korean interests—including higher defense spending and closer alignment against China—to accommodate the U.S. and maintain its security umbrella.
• Autonomy-First Camp: This group prioritizes South Korean national interests, questioning the long-term reliability of a transactional partner. They advocate for strategic autonomy, the transfer of Wartime Operational Control (OPCON), and a "Plan B" focused on diversifying economic and security partners beyond the U.S..

Domestic Policy Subservience

The Trump administration's "intense pressure" has forced President Lee Jae Myung to make domestic policy concessions that have domestic political ramifications. For example, the administration was forced to water down digital services rules (the Online Platform Monopoly Prohibition Act) to avoid friction in bilateral ties, despite domestic calls for tech regulation. This has led to a perception that South Korean domestic economic and regulatory interests are being made subservient to the demands of the U.S. administration.

Under the second Trump administration, "modernizing" the alliance has become a strategic priority for President Lee Jae Myung, who aims to transform the relationship into a "more reciprocal and future-oriented" partnership in response to a changing security landscape. This modernization is characterized by South Korea providing significant concessions to align itself with the transactional and "isolationist" shift in U.S. policy.

Reciprocity through Industrial Integration

A core component of modernizing the alliance is South Korea's "doubling-down" on its role as a vital industrial and technological partner to the U.S..

• Economic Commitments: South Korea has committed to a massive US$350 billion investment package in the U.S. to resolve trade impasses and support a "renaissance" in American manufacturing.
• Strategic Shipbuilding: Modernization is heavily anchored in the "Make American Shipbuilding Great Again" (MASGA) initiative, with South Korea pledging US$150 billion to revive the U.S. naval and merchant fleet.
• Leverage: By integrating its "Big Three" shipbuilders into the U.S. defense industrial base, Seoul hopes to gain strategic leverage in future trade negotiations.

Security Concessions and New Strategic Templates

In exchange for its economic and industrial commitments, South Korea has secured significant "modernized" security guarantees.

• The "Return Gifts": Strategic breakthroughs include U.S. approval for South Korea to build a nuclear attack submarine and a commitment to the transition of Wartime Operational Control (OPCON), allowing Seoul more command over its military fate.
• Strategic Flexibility: The alliance is shifting its focus; while South Korea remains focused on North Korea, the U.S. is increasingly pressuring Seoul to take a larger role in deterring China and protecting the "first island chain".

The Challenges of an "Illiberal" Modernization

The sources suggest that this modernization comes with profound long-term risks and a "new normal" of uncertainty.

• Legitimizing Mercantilism: By agreeing to transactional trade terms, South Korea is seen as legitimizing the U.S.'s illiberal and mercantilist approach, potentially fragmenting international institutions like the WTO.
• Strategic Entrapment: Closer defense cooperation risks strategic entanglement, where South Korea may be pulled into regional conflicts (such as in the Taiwan Strait) that are unrelated to its immediate national interests.
• The "Plan B" Debate: The unpredictable nature of the alliance has forced South Korean policymakers to re-evaluate their assumptions, with some scholars advising the government to prepare a "Plan B" focused on diversifying economic and security partners beyond the U.S..

Ultimately, while South Korea has secured its short-term interests through these modernization efforts, the sources warn that establishing a template where national interests are made subservient to the alliance could carry high long-term costs, including a regional arms race and alienated relations with China and Russia.