Low Tariffs Aren’t Enough: Korea Should Remove Its Trade Barriers With the United States
What matters now in U.S.-Korea trade isn’t what crosses borders but the rules and restrictions that await beyond them. While tariffs have steadily declined under the bilateral free trade agreement (KORUS), American firms continue to face a dense layer of regulatory obstacles—from opaque rules to sector-specific constraints—that limit market access and distort competition. This tension is most evident in digital services, semiconductors, and cloud infrastructure, where American firms play a foundational role. Yet while Korea benefits from U.S. defense and market access, Korean authorities often treat these companies as digital outsiders. After a period of escalating tariff tensions between the United States and South Korea, a recent agreement to pause reciprocal tariffs for 90 days has created a diplomatic window for Seoul to reset and reaffirm its commitment to balanced and frictionless trade.
KORUS brought average tariff levels below 3 percent in 2024, and that level is expected to fall even further—below 0.5 percent—by 2026. But that openness is increasingly challenged by a trend toward regulatory protectionism at home. Even though U.S. firms are key players in Korea’s innovation economy, they are confronting rising digital compliance burdens and proposed competition rules such as the Platform Competition Promotion Act (PCPA) that appear likely to disproportionately affect foreign platforms. This two-tiered approach is fueling frustration in Washington and feeding into the Trump administration’s broader trade recalibrations.
While much of the Trump administration’s trade tactics have been criticized, not everything about Trump-era trade policy is off base. Since Trump arrived on the American political scene a decade ago, his coalition has accurately diagnosed that the status quo of the global trade system, particularly ignoring China’s violations of its World Trade Organization (WTO) commitments, were among the causes of the deindustrialization of the American economy. For South Korea, the message is clear: Beneath the rhetoric lies a legitimate concern that allies have not always played fair, ultimately harming American manufacturing.
South Korea’s use of nontariff barriers (NTBs) illustrates this concern. In particular, the Korea Fair Trade Commission (KFTC) has emerged as a key driver of these procedures targeting foreign firms. For example, KFTC last year fined Coupang—a U.S.-based firm that generates over 40 trillion KRW ($28 billion) in annual sales in Korea—approximately 140 billion KRW ($98 million) for common retail practices like algorithm-based product placement, despite courts later suspending enforcement. Google and YouTube also face regulatory scrutiny over platform integration and network usage fees—even though Google’s infrastructure supports nearly 30 percent of Korea’s Internet traffic. Korea’s restrictions on exports of location-based data services, such as Google Maps, is a disadvantage to American companies trying to optimize their products globally. Netflix, too, has come under fire, with KFTC investigating its subscription-cancellation practices and signaling potential sanctions. These actions function as de facto tariffs, selectively burdening American tech while Chinese and domestic firms expand with less oversight.
Seoul should use this 90-day pause in tariffs as a diplomatic reprieve to signal to America its commitment to balanced and frictionless trade relations. This means taking a proactive approach and focusing on all trade barriers, particularly related to technology, not just tariffs. Despite the erratic implementation, the White House has consistently expressed its concerns about NTBs, as indicated on Liberation Day’s Executive Order, by referencing the conclusions of the latest National Trade Estimate Report on Foreign Trade Barriers, and by making public comments on the matter.
A good first step for Korea would be to align with U.S. standards on data governance and digital regulation, and demonstrate its reliability as an economic partner. Rep. Carol Miller’s (R-WV) reintroduction of the U.S.-Republic of Korea Digital Trade Enforcement Act—a law that would authorize trade restrictions if Korea imposes discriminatory digital competition regulations on U.S. firms—underscores the urgency of these reforms. In other words, if South Korea follows the trend of the “Brussels Effect” and passes legislation that either de jure or de facto targets American tech leaders, it risks formal designation as a bad-faith trade partner under U.S. law.
South Korea faces a strategic decision: Address persistent trade asymmetries, or risk straining its long-standing alliance with the United States and lose autonomy vis-à-vis China. What’s needed is a genuine reset—one grounded in open trade and closer coordination with Washington to counter mercantilist practices, particularly from China. This is no time for regulatory nationalism. American firms, especially in the tech sector, are increasingly facing steep compliance costs and legal uncertainty both in Korea and around the globe, while Chinese players like Temu and AliExpress—now exceeding 14 million monthly users in Korea—navigate the world’s markets with comparative ease. This double standard threatens not just bilateral trust, but Korea’s long-term competitiveness in the global digital economy.
