Was the KORUS FTA a Horrible Deal?

Hyeongwoo Kim (), Madeline H. Kim, Divya Sadana, Peng Shao and Jie Zhang

No auwp2025-05, Auburn Economics Working Paper Series from Department of Economics, Auburn University

Abstract: Donald Trump argued that the Korea-U.S. Free Trade Agreement (KORUS FTA) was a "horrible deal," pointing to a substantial increase in the U.S. trade deficit with Korea following the agreement's implementation in March 2012. Notably, during the same period, the U.S. trade balance with numerous other major trading partners, none of which maintained an FTA with the United States, also deteriorated, raising doubts as to whether the KORUS FTA was the primary cause of the observed imbalance. This study evaluates the causal effect of the KORUS FTA on the U.S.-Korea trade balance using a difference-in-differences framework, complemented by event-study and synthetic control analyses as robustness checks. The empirical findings, after accounting for business cycle fluctuations, provide overall support for Trump's assertion.

Keywords: KORUS FTA; Trade Deficit; Difference-in-Differences; Causal Effect; Event Study; Synthetic Control Analysis (search for similar items in EconPapers)
JEL-codes: F13 F14 (search for similar items in EconPapers)
Date: 2025-08
New Economics Papers: this item is included in nep-sea
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Related works:
Working Paper: Was the KORUS FTA a Horrible Deal? (2024)
Working Paper: Was the KORUS FTA a Horrible Deal? (2022)
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