U.S.-ROK Negotiations: An Opportunity to Reset on Trade, Investment, and Technology

Commentary by Philip Luck and Erin L. Murphy

Published April 23, 2025

The shape and scope of trade negotiations between the United States and the Republic of Korea (ROK) could have a significant impact not only on the two nations but also on the Indo-Pacific and global technology race. Amidst political shifts, an expansive U.S. tariff regime, and protectionist-leaning policies in the ROK, there stands a strong foundation built on an enduring military alliance, decades of economic partnership, and mutual economic security concerns. This foundation should serve as the anchor on which the two countries must learn to address these key areas of mutual concern that underpin economic growth, innovation, and security, namely semiconductors, shipbuilding, digital technology and connectivity, and energy and battery technology. For the United States to hit targets on its own stated goals on these industries, a partnership with the ROK is paramount. Should negotiations go sideways, both nations have much to lose, particularly South Korea's export-oriented economy and U.S. expectations for investment in states in the Midwest and South. But both have much to gain on critical and emerging technology, and negotiations will require transcending a narrow understanding of the relationship characterized by trade imbalances and embracing the full spectrum of the bilateral partnership.

Weaving the Investment Fabric

The U.S.-ROK relationship must be viewed holistically, not just through a trade imbalance or cost-sharing lens.

The ROK has also significantly increased its investments in the United States, becoming its largest investor for the first time in 2024 and comprising 2.3 percent of overall foreign direct investment into the United States. Driven by incentives offered through the CHIPS Act and Investment Reduction Act, as well as concerns around U.S. export controls targeting China, ROK companies committed tens of billions in investments, including over $37 billion from Samsung to strengthen their leading-edge semiconductor manufacturing in the United States. The United States is also the second-largest export destination for South Korea, with exports totaling $127.8 billion in 2024.

Both countries have also engaged in strengthening cooperation in other areas, particularly on battery technology, electric vehicles, and nuclear energy. South Korea has already invested heavily in the U.S. market: Hyundai Motor Group's $5.4 billion electric vehicle plant in Georgia, SK Innovation in partnership with Ford on a $11.4 billion investment in two electric battery parks Kentucky and Tennessee, and Hanwha Q Cells' $2.5 billion investment to expand its solar factories in Georgia. The United States and ROK also have a long-standing relationship on nuclear energy development, and this month marks the 10-year anniversary of the 2015 U.S.-ROK Nuclear Agreement.

Trade and Non-Trade Barriers: Obstacles to Greater Cooperation

Despite a robust and comprehensive bilateral relationship, there are still significant roadblocks to greater cooperation and trust. In the American Chamber of Commerce in Korea 2025 Business Environment Scorecard for South Korea, the U.S. business community noted that foreign investors faced regulatory opacity, inconsistent interpretation of regulations, unanticipated regulatory changes, underdeveloped corporate governance, rigid labor policies, and Korea-specific consumer protection measures. Previous reports also discussed the challenge of navigating the influence of large conglomerates, known as chaebols. For the sectors this commentary has highlighted, the chamber noted that there were opportunities on shipbuilding, semiconductors and greater digital connectivity with a focus on free flow of data, but on the latter, noted that Korea's regulations impose stringent requirements on cloud providers, internet service providers, and other digital service providers, including "online platforms," that diverge from international standards.

For example, the National Intelligence Service, since 2014, has imposed additional cybersecurity certification requirements and has categorized public institutions by sensitivity, many of which have been designated at the highest tier. This has resulted in the public sector being largely off-limits to private security engagement, the support of which would be critical to improving the ROK's cybersecurity practices and capabilities. There are also barriers to foreign cloud service providers that require network usage fees for foreign content providers.

Challenges abound as well for online platforms, with legislation proposed to empower ROK regulators to preempt potentially anticompetitive practices before they occur. A CSIS commentary published last year assessed anti-competition laws and noted that they would also bar practices where platforms prioritize their own products, and tying, where users are incentivized to use additional products from the same company. The bill restricts platforms from limiting users' ability to access third-party services and requires platforms to disclose their algorithms. The companies most likely to be caught in the bill's net are major U.S. companies such as Google, Meta, Microsoft, Apple, and Coupang, and even South Korean firms Naver and Kakao.

For the ROK, the imposition of tariffs, coupled with the ongoing complaints from Trump about cost sharing related to troop presence, destabilizes the relationship and causes the ROK to seek to strengthen its own industrial capacity and potentially limit engagement with the United States. The Trump administration should focus on the investments the ROK has made in the United States and on compartmentalizing the issue of the increasing trade surplus with the United States. The United States currently has a $66 billion trade deficit with the ROK, the largest in recent years. Trump initially imposed a 25 percent tariff on the ROK. South Korea announced on April 15 its own version of the CHIPS Act, with a support package of $23.25 billion for its semiconductor industry, likely spurred by U.S. tariffs.

Additionally, unpredictable policies, pressure to decouple from China and adhere to export controls and other sanctions without previous consultation also undermine the stability of the economic relationship.

Forging Ahead on Cooperative Economic Security

While trade and nontariff barriers exist, there is plenty of grist that shows both countries share mutual economic security concerns, and their respective industrial and technological strengths would benefit both greatly in addressing these concerns and furthering the economic partnership.

Shipbuilding

On April 9, Trump issued an executive order (EO) to push for revitalizing U.S. commercial shipbuilding capabilities and capacity. South Korea has the second-largest shipbuilding industry in the world, bested only by China, and dominated by Samsung Heavy Industries, Hanwha Ocean, and HD Hyundai Heavy Industries. The United States should leverage South Korea's shipbuilding prowess as a strategic partner in rebuilding the United States' industrial maritime base. A competitive shipbuilding sector is essential to U.S. national defense, commercial competitiveness, and its Indo-Pacific strategy, yet the domestic industry has eroded to unsustainable levels. It will take years for the United States to achieve the goals in the EO, including securing the materials to build manufacturing and shipbuilding capacity, finding the workforce, and upgrading or identifying new locations for the post.

The above-mentioned South Korean companies have already stepped in to fill critical gaps, actively repairing U.S. naval ships, investing in struggling shipyards, and collaborating with U.S. shipbuilders to build state-of-the-art commercial vessels.

South Korea offers not just scale, but digitally integrated, environmentally advanced production-precisely what the United States needs to rapidly restore its maritime strength without waiting a generation to rebuild from scratch.

Semiconductors

Expanding U.S. semiconductor manufacturing capabilities and denying technological advancements or access to certain chips that could potentially be used for military purposes by China is a bipartisan effort in Washington. These efforts benefit from cooperation between the U.S. and South Korea, which can evolve into a full-fledged industrial ecosystem.

South Korean firms like Samsung and SK Hynix make up the majority of global semiconductors, and semiconductors are South Korea's largest export. Samsung was also awarded up to $4.75 billion in direct funding through the CHIPS Act to build on its investment of over $37 billion to build upon its business in Texas to focus on the development and production of leading-edge chips, including two new leading-edge logic fabs and a research and development fab.

The bilateral commercial partnership and government-to-government cooperation on standards and policies ensure both nations remain globally competitive and less exposed to geopolitical shocks. It also provides both with a competitive edge as China ramps up production in both legacy and advanced chips, while making significant breakthroughs in AI applications that could reshape global technology leadership.

Digital Connectivity and Cybersecurity

Free flow of data and innovative digital platforms are critical to economic growth and leadership in technological modernization. Tariffs and protective measures prevent U.S. digital platforms, cybersecurity software firms and cloud providers from competing fairly in the South Korean market. Tariffs also undermine cooperative efforts and the inclination to deal with nontariff barriers.

Cooperating on digital connectivity not only has a commercial application but also enhances both countries' cyber resilience. Both countries have been frequent targets of sophisticated cyberattacks from state and non-state actors, exposing vulnerabilities in their digital infrastructure. U.S. companies focused on cybersecurity practices and defenses have a lot to offer the ROK and its public and private sectors. Cybersecurity is a huge area where the U.S. private sector has something to offer, but they don't have the capabilities. The problem is that its public sectors are not open to U.S. private sector companies bidding on tenders. Bridging policy gaps and harmonizing cybersecurity standards would allow both nations to build a more interoperable and resilient digital ecosystem capable of withstanding future threats.

Energy

Cooperation between the United States and South Korea on energy technology can provide the two with a step up in the competition with China, which is beginning to dominate the electric vehicle industry, and the two countries must deepen energy cooperation to reduce exposure to strategic vulnerabilities in global supply chains and accelerate their leading edge in energy and battery technology.

Both countries are also pursuing partnerships on small modular reactors, a potential game-changing technology that could provide safer, cleaner, and enhanced electrification that can meet the energy needs that are increasing exponentially. The need for reliable sources of energy is directly tied to leadership in emerging technology, where AI, quantum computing, and data centers require

The United States cannot achieve its industrial and climate goals without ramping up production of critical technologies like batteries, solar panels, and electric vehicle components. For the United States, collaborating with South Korea means not only bringing jobs to the United States but also insulating key sectors from geopolitical disruptions and price shocks.

To Stabilization and Longevity

Trade deficits should not be the only factor governing the bilateral relationship, nor should other issues between the two countries, including nontariff barriers and cost-sharing concerns, be compartmentalized. The relationship is comprehensive with a strong foundation, lending itself to pursuing a holistic view of ties. While non-trade barriers continue to exist in areas such as digital services and must be negotiated to improve the investment environment for U.S. businesses, it is important to understand that U.S. companies are also interwoven in the fabric of the bilateral relationship. Additionally, South Korean investment in the United States has led to the building and expansion of factories replete with jobs for U.S. workers.

Opportunities abound in areas of mutual strengths that address key economic security issues. South Korea is uniquely positioned to help the United States close urgent capability gaps and meet long-term industrial goals, coproducing naval ships, codeveloping next-generation semiconductors and digital platforms, and U.S. investments can spur economic growth and innovation. To seize this moment, policymakers in both capitals must resist zero-sum framing and instead double down on sectors where mutual investment creates shared resilience. A renewed Korea Free Trade Agreement framework should be the platform for this rebalancing-not as a transactional trade agreement, but as a strategic economic partnership built for a world defined by geopolitical competition, technological disruption, and alliance-based supply chains.

Philip A. Luck is director of the Economics Program and Scholl Chair in International Business at the Center for Strategic and International Studies (CSIS) in Washington, D.C. Erin Murphy is the deputy director for the Chair on India and Emerging Asia Economics and senior fellow of Emerging Asia Economics at CSIS.

The authors are grateful to Joseph Lim, intern with the Economic Security and Technology Department, for his valuable assistance on this paper.

This commentary is made possible through generous support from Coupang.

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