Can America and South Korea strengthen ties amid economic frictions?

Kari Heerman
Last week’s Section 301 action leaves South Korea’s competitive position in the U.S. market largely unchanged relative to its regional peers. South Korea received the same treatment as Japan and Taiwan—additional duties capped at 12.5% inclusive of most-favored-nation rates—and our estimates suggest only modest changes in average tariff rates for all three. China, by contrast, faces an additional 12.5% tariff on top of the otherwise applicable duty rather than an inclusive ceiling.

More consequentially, the administration has largely preserved the tariff architecture first introduced on “Liberation Day” by shifting from the International Economic Emergency Powers Act (IEEPA) to other authorities. The U.S.-Korea Strategic Trade and Investment Deal capped additional duties at 15%. That rate became inoperative when the IEEPA tariffs were struck down, leaving the new Section 301 action to govern South Korea’s tariff treatment.

The next question is whether the separate Section 301 investigation into structural excess capacity becomes the vehicle for further tariffs. The issue is not simply whether tariffs rise, but whether the Trump administration changes the relative tariff treatment of South Korea and its competitors, reshaping preferential access to the U.S. market.

Kari Heerman
I expect this administration to continue using trade policy actively, including relying on different statutory authorities to use tariffs as leverage in both commercial and broader strategic negotiations. I do not expect strengthening the multilateral trading system to become a focus. Instead, the emphasis is likely to remain on bilateral bargaining, targeted agreements, and executive action.

Beyond the current administration, the United States is unlikely to return to the trade policy consensus of the previous three decades. There is broad agreement in Washington that the previous system did not do enough to address economic security, resilience, or the challenges posed by China’s nonmarket practices. A contested geopolitical environment has strengthened the perception that economic openness alone is not a sufficient organizing principle for U.S. trade policy.

What is much less settled is what trade policy should be designed to achieve and, by extension, the institutional architecture needed to sustain it. As such, allies should expect continued experimentation with different trade tools and legal authorities. That creates opportunities as well as risks. A future administration may place greater emphasis on cooperation with allies. If so, that cooperation is likely to be strongest where strategic and economic interests genuinely align, as in U.S.-South Korea cooperation on shipbuilding and semiconductor manufacturing.

Andrew Yeo
The House Judiciary Committee’s July 2026 report, “Closed for Competition: South Korea’s Discriminatory Attacks on American-owned Businesses,” argues that South Korean regulators have engaged in discriminatory enforcement against American-owned companies, using Coupang, a Seattle-based e-commerce platform (often described as the “Amazon of South Korea”), as its principal case study. The report alleges that Seoul employed coercive investigations, excessive penalties, and burdensome regulations that violate commitments under the recent U.S.-South Korea trade agreement, thus creating an uneven playing field for U.S. technology firms. Seoul rejects those allegations, maintaining that its actions against Coupang stem from a major 2025 data breach affecting millions of users and were taken under Korean privacy and consumer-protection laws without discrimination. It also asserts that regulation of online platforms is shaped by antitrust practices rather than discrimination against U.S. companies.

What is at stake is less the outcome of a single regulatory case than confidence in South Korea’s digital governance. If Washington concludes that Korea’s regulatory system disproportionately burdens foreign firms, it could complicate cooperation on digital trade, AI, and investment. At the same time, Seoul faces a legitimate challenge: maintaining robust privacy and competition standards while assuring investors that enforcement is transparent, technology-neutral, and predictable. The Coupang dispute is unlikely to derail an alliance that Washington and Seoul see as a “linchpin for peace, security, and prosperity” on the Korean Peninsula and the Indo-Pacific. However, if criticism over market-access barriers, digital trade, and platform regulation becomes a recurring U.S. grievance, it could spill over into broader negotiations on trade, strategic investment, and emerging technology cooperation.

Andrew Yeo
South Korea is positioning itself not simply as a supplier of AI components, but as a core manufacturing and infrastructure partner for the U.S. AI industry. Lee’s participation at the San Francisco AI Summit reflected a deliberate strategy to combine Korea’s strengths in advanced manufacturing with America’s leadership in frontier AI models and software. The summit highlighted proposed partnerships between U.S. and South Korean firms—reported to be worth up to $950 billion over time—covering high-bandwidth memory chips, foundry services, advanced packaging, AI data centers, and digital infrastructure. Korean conglomerates, including SK Group and Samsung, announced expanded cooperation with major U.S. technology companies such as NVIDIA and Broadcom to support growing AI demand.

For Seoul, the objective is to establish South Korea as a leading AI manufacturing and production hub within trusted global supply chains, while deepening its role in next-generation AI infrastructure. For the United States, closer integration with Korean firms strengthens supply-chain resilience, expands access to advanced semiconductors and data-center capacity, and reduces dependence on China for critical technologies. More broadly, the summit underscores how the U.S.-ROK alliance is evolving beyond traditional security cooperation into an industrial and technological partnership, with Korea providing manufacturing scale that complements America’s AI innovation leadership.

Andrew Yeo
U.S.-ROK shipbuilding cooperation has entered an implementation phase. The launch of the KUSPC provides the first permanent institution dedicated to connecting Korean shipbuilders with U.S. government agencies, industry, and training programs, as both countries seek to expand America’s shipbuilding capacity. The center builds on the Korea-U.S. Shipbuilding Partnership Initiative announced earlier this year and supports South Korea’s planned investment in the U.S. maritime sector.

The more difficult task now is implementation. Success will depend less on new announcements than on whether the two governments can execute projects involving shipyard modernization, workforce development, supply-chain integration, and commercial and naval vessel production. While political support in both capitals remains strong, bureaucratic hurdles—including procurement rules, interagency coordination, financing, and technology-sharing restrictions—could slow progress, resulting in misaligned expectations and frictions. Korean firms, including Hanwha Ocean, HD Hyundai, and Samsung Heavy Industries, have announced partnerships with U.S. counterparts, but as U.S. Commerce Secretary Howard Lutnick has argued, translating those agreements into tangible industrial outcomes will take sustained coordination.