South Korea’s Protectionist Economy: Shedding The Golden Straitjacket
South Korea’s Protectionist Economy: Shedding The Golden Straitjacket
In recent political discourse, President Donald Trump once again called attention to South Korea’s unfair trade practices—only to be met with the usual media dismissal, branding him a liar. Yet, anyone with a semblance of understanding of the Korean economy knows he was right. South Korea, despite being one of the world’s most advanced economies, still operates under protectionist policies that limit U.S. exports while benefiting freely from the American market. Meanwhile, the United States funds South Korea’s defense, further exacerbating this lopsided relationship.
South Korea was once a struggling developing nation. To survive, it heavily protected its domestic industries—especially chaebols (massive conglomerates like Samsung, Hyundai, and LG). This included high tariffs, strict import regulations, and direct government support to its firms. However, unlike Japan, which gradually opened its markets after its post-war economic boom, South Korea has continued to shield its industries while still reaping the rewards of free trade agreements like KORUS. South Korea still imposes high tariffs on key American goods, especially agricultural products, automobiles, and consumer goods.
Rice is excluded from the KORUS FTA, with 500%+ tariffs, making American rice virtually non-existent in Korea. Even after tariff reductions, American beef and dairy face additional non-tariff barriers such as quotas and health regulations that favor domestic producers. U.S. liquor and tobacco products face 15-40% tariffs, artificially raising prices for American goods. Private individuals importing from the U.S. still pay full tariffs, unlike corporate importers who benefit from trade deals. While Korean firms like Hyundai, Kia, and Samsung dominate American markets, U.S. firms struggle to gain ground in Korea due to these barriers.
Economist Ha-Joon Chang, in his book Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism, explains how nations use protectionism to develop but must eventually embrace open markets to sustain long-term growth. South Korea still operates as if it is a developing country, despite having the world’s 10th largest economy with a GDP larger than Russia’s. Japan took a different approach by lowering tariffs once its industries became competitive, encouraging foreign direct investment (FDI), and shifting to a service and high-tech economy instead of relying on protected manufacturing exports. If Korea does not transition like Japan, its economy risks stagnation. Its aging population, over-reliance on exports, and refusal to open domestic markets will hurt its long-term prospects. To remain globally competitive, South Korea must remove trade barriers, encourage fair competition, and shed its outdated economic policies.
South Korea’s economic landscape is a complex interplay of historical protectionism, strategic industrial policies, and contemporary trade practices that often disadvantage foreign competitors, particularly those from the United States. While the nation has achieved remarkable economic growth, its journey has been marked by practices that, at times, conflict with the principles of free and fair trade. A notable example of South Korea’s contentious trade practices is the dispute over large residential washers. In 2011, Whirlpool Corporation filed petitions alleging that washers imported from South Korea and Mexico were being sold in the U.S. at prices below fair market value—a practice known as dumping. The U.S. Department of Commerce investigated and, in 2013, imposed anti-dumping duties on these imports, with rates reaching up to 82% for certain South Korean producers. South Korea challenged these measures at the World Trade Organization (WTO), disputing the methodologies used by the U.S. In 2019, the WTO authorized South Korea to impose annual trade sanctions of $84.81 million against the United States, highlighting the complexities and ongoing tensions in trade relations between the two nations.
Beyond specific industries, South Korea maintains import regulations that pose challenges for foreign businesses and consumers. The country imposes a flat 10% Value Added Tax (VAT) on all imports and domestically manufactured goods. Additionally, a special excise tax of 10-20% is levied on certain luxury items and durable consumer goods. For individual consumers, importing goods from platforms like Amazon can be costly. While there are exemptions for orders under specific thresholds, purchases exceeding these limits are subject to import duties and taxes, making foreign products significantly more expensive. Moreover, South Korea enforces stringent regulations that can act as non-tariff barriers, complicating market entry for global e-commerce giants.
The media’s knee-jerk reaction to Trump’s statements is a perfect example of how they distort reality to fit their agenda. Instead of fact-checking South Korea’s actual trade policies, outlets immediately branded Trump’s claims as false. But the facts speak for themselves: the U.S. has a $66 billion trade deficit with South Korea, South Korea still applies high tariffs on U.S. imports despite KORUS, non-tariff barriers effectively block American firms from competing fairly, and meanwhile, the U.S. continues to fund South Korea’s defense—a strategic necessity, but one that should not come without fair economic policies in return. Discussions about South Korea’s trade practices often reveal a disconnect between political rhetoric and media narratives. Critiques of South Korea’s protectionist measures by U.S. officials have sometimes been dismissed or downplayed in media coverage, despite evidence supporting these concerns. This disparity underscores the need for informed and balanced reporting that accurately reflects the complexities of international trade dynamics.
South Korea is no longer a struggling developing nation. It is a global powerhouse that must play by the same rules it enjoys abroad. If South Korea wants to benefit from free trade, it must abandon its outdated protectionism. If it refuses, the U.S. must take action—whether through reciprocal tariffs, defense cost-sharing conditions, or tougher trade negotiations. Fair trade must be truly fair—not just when it benefits Korea. The media can spin reality all they want, but the numbers—and the truth—don’t lie. The American people are footing the bill for South Korea, and it needs to stop. Many Americans can’t afford the basic necessities of life, yet we continue to fund Korea’s military and tolerate an unfair trade imbalance. It’s time to focus on building America, not Korea.
