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Challenges and Opportunities for KORUS Cooperation under Trump 2.0 Industrial Policies
- Author Hyok Jung Kim
- Series322
- Date2025-08-20
Since the launch of the Trump 2.0 administration, a new global trade order, marked by sweeping shifts in industrial policy, has taken center stage. We are witnessing one of the most protectionist regimes in the past century, with effective tariff rates approaching those seen under the Smoot-Hawley Act of 1930. The ideas championed by Alexander Hamilton, the United States’ first Treasury Secretary—high tariffs and targeted subsidies—are once again shaping policy.
Even before Trump returned to the White House, Korean manufacturing was already investing heavily in the United States. Between 2021 and 2024, the U.S. was the top destination for Korea’s outbound greenfield investment (total foreign direct investment excluding acquisitions). In 2024 alone, greenfield investment in the U.S. reached $14.8 billion, which is ten times the amount invested in China. Excluding finance and insurance, nearly half of Korea’s greenfield investment during this period went into manufacturing.
Virtually every major Korean industry in the manufacturing sector has moved to establish a U.S. presence. From 2021 to 2024, the battery sector invested $7.8 billion, accounting for 35 percent of total greenfield investment. Integrated circuit manufacturing contributed $5.1 billion, the chemical industry $3 billion, and the automobile sector about $1 billion. Most of these projects began construction during the Biden administration and are now moving toward mass production.
The recent Korea–U.S. tariff deal adds another $350 billion in planned Korean investment in the U.S., including $150 billion for the “Make American Shipbuilding Great Again” (MASGA) initiative, with the rest spread across semiconductors, nuclear power, energy, batteries, and biopharma. If implemented as planned, this would represent an unprecedented level of bilateral economic cooperation.
For context, Korea’s total FDI in the U.S. between 2021 and 2024 was about $108 billion, of which $72 billion was greenfield. A $350 billion commitment over Trump’s second term would be three to five times larger than during the Biden era. According to the U.S. Bureau of Economic Analysis, America’s greenfield investment receipts from Korea in 2023 constituted one third of total inbound greenfield investments, and were roughly twice the total from all 58 European countries combined, which is exceptional.
For decades, many Korean industries relied on China, shifting entire supply chains there and exporting from that base. But the new trade order, and Korea’s commitments in the U.S. will shift not only manufacturing bases, but also the production models that underpinned Korea’s industrial leadership. Replicating the cost-efficiency of Chinese operations in the U.S. will be difficult. Also, product lines for the U.S. and Chinese markets will diverge.
Meanwhile, Trump 2.0’s industrial policies are still taking shape. After passage of the “One Big Beautiful Bill Act,” many Biden-era tax credits from the Inflation Reduction Act have been rescinded, shortened, or burdened with new conditions. Assuming a stable business environment for another four to eight years would be unrealistic.
A predictable U.S. policy framework is therefore vital. Most tariff policies from Trump’s first term have been revised, and all prior Section 232 agreements have been revoked. Even U.S.-based firms have faced an unpredictable and sometimes adversarial policy climate. Korean firms building new manufacturing ecosystems, often in industries that have declined domestically in recent decades, must navigate high labor and construction costs while adapting to local conditions. In some cases, private negotiations with the administration have been necessary to secure favorable terms, underscoring the volatility of the environment. In this sense, Korea needs to build a structured communication channel to convey industry concerns on tariffs, taxes, and regulation directly to U.S. policymakers.
For sectors like shipbuilding, nuclear power, and batteries, where production bases are being newly established or overhauled, U.S. government financial support will also be crucial. While Korean government loans and guarantees are helpful, other measures could accelerate mass production: production-linked incentives, government procurement commitments to ensure baseline demand, and targeted infrastructure investments. These should complement Korea’s own industrial support to ensure that this unprecedented wave of investment achieves its full potential.
Ph.D., Associate Research Fellow, North America and Europe Team
Korea Institute for International Economic Policy
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