Shifts in the economic and security landscape under the Trump presidency and strategic imperatives for Korea’s defense Industry

Soonhyung Sim
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Soonhyung Sim: Korea Institute for Industrial Economics and Trade

No 3, i-KIET Issues and Analysis from Korea Institute for Industrial Economics and Trade

Abstract: Under the second presidency of Donald Trump, the United States has been increasingly resorting to security cooperation as a tool to advance US economic interests, reflecting a broader strategic shift in the way it uses security guarantees as economic leverage.

- In response, US allies such as member states of the North Atlantic Treaty Organization (NATO) have accelerated their rearmament efforts and moved to reduce their security dependence on Washington. This wave of rearmament among NATO countries is expected to create short-term opportunities for South Korean defense firms. - However, over the longer term, these benefits may taper off as NATO nations build out their own defense supply chains and deepen intra-alliance cooperation.

At the same time, Trump’s transactional approach to foreign policy, which ties promises of economic and security cooperation to arms sales, is likely to intensify competition in the global defense market. His push to establish a US-centered defense ecosystem raises concerns that the current Korea-US defense cooperation framework could be sidelined.

- The US continues to pressure Seoul to pay more for hosting US troops in Korea; increased costs could lead to delays in joint projects and hinder the qualitative advancement and export sophistication of Korea’s defense industry.

In response, it is essential to swiftly establish lasting cooperation institutions, such as a reciprocal defense procurement agreement (RDP-A), to reinforce Korea-US defense cooperation and identify strategic leverage points, particularly in relation to urgent US supply chain needs.

- For example, naval MRO (maintenance, repair, and overhaul) cooperation could be used as a counterbalance in cost-sharing negotiations and a catalyst for concluding the RDP-A. - A government-wide export support system should also be established to enhance Korea’s competitive edge in key regions such as Europe and the Middle East

Keywords: US tariffs; defense; defense industry; weapons manufacturing; arms manufacturing; defense exports; w (search for similar items in EconPapers)
JEL-codes: F13 F20 F51 F52 (search for similar items in EconPapers)
Pages: 6
Date: 2025-06-12
New Economics Papers: this item is included in nep-sea
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Published in i-KIET Issues & Analysis, No. 185

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