From tariffs to tribute: The $350bn price of US–South Korea 'parity'

Atul Chandra

On 29 October, the carefully scripted pageantry of the United States–South Korea alliance in Gyeongju and Seoul met an unwelcome counter-narrative from the streets.

While US President Donald Trump was being feted with a Silla-era replica gold crown and Korea’s highest honour, thousands of workers, trade unionists, farmers, and students and women’s collectives converged near the Asia-Pacific Economic Cooperation (Apec) venues. They chanted a unified dissent: “No kings” and “No to Apec for the 1%”.

Organisers framed the protest as a demand for the restoration of national dignity against what they saw as an act of economic coercion. The message, captured by banners that collapsed diplomacy into a single, damning word -extortion – was visceral and immediate.The agreement, hastily announced by Trump as “pretty much finalised”, was presented by officials as a breakthrough: US tariffs on Korean cars and parts would drop from 25% to 15% in exchange for a staggering $350bn commitment from South Korea. It included $200bn in cash over time and $150bn aligned to US shipbuilding. 

Sectoral sweeteners fluttered through the talking points – aircraft parts, timber, pharmaceuticals and generics – just enough to calm markets and let a few executives exhale.

On the streets, the verdict was harsher: a toll booth had been erected at the border, and the price of passage would be paid out of Korea’s social future.

Stripped of the fanfare and the euphemisms of ‘partnership’, this is not a trade deal in any meaningful, reciprocal sense.

It is a textbook example of neo-mercantilism, where a core imperial power unilaterally sets the tariff fire and then sells the hose on the condition that the subject nation pays a massive subsidy to underwrite the core’s own industrial policy.

As protesters asserted, it is an act of a modern state functioning as a colony of an imperial master.

The sheer arithmetic of the deal exposes the profound trade-offs imposed on the South Korean people.

Korea’s 2025 central government expenditure is pegged at 677tn South Korean won (about $477bn). The cash leg of the deal – $200bn – amounts to roughly 42% of that annual budget; the full $350bn headline nears 73%. These are not marginal adjustments; they are at the centre of policy space.

Korea’s foreign exchange reserves stood near $422bn in September 2025. Even staged at $20bn per year, the cash outflow alone would consume nearly half that stock over a decade.

Reserves are not abstract numbers; they are the public’s fiscal firewall, and trading nearly half of that stock over a decade for tariff relief – relief from penalties imposed by the very country demanding the payment – is a sober risk.

The social baseline is equally stark. Public social expenditure in 2021 was 15.2% of gross domestic product (GDP) – about 70% of the Organisation for Economic Co-operation and Development (OECD) average – evidence of a welfare state still under construction.

Meanwhile, elderly poverty remains the highest in the OECD, with nearly two in five seniors living below half the median income in 2023. The 2025 minimum wage has only just crossed 10,030 won per hour (around 2.1m won per month for full-time work).

In that light, tens of billions redirected outward every year are not an abstract macro variable; they are a direct subtraction from universal childcare, eldercare, public housing, mental health services, and the infrastructures that make equality real.

Supporters of the deal point to guardrails. Seoul pressed to cap annual cash outflows at up to $20bn and to sequence disbursements. The phasing is said to be sensitive to won stability and the Bank of Korea’s tolerance thresholds.

Analysts still warn of persistent currency pressure as funds flow out. Guardrails are sober, but they do not change direction. A multi-year outward pipeline is being built to buy relief from penalties imposed by the same capital whose factories will then receive the investments. Macroeconomic prudence can smooth the path; it cannot alter where the path leads.

The opportunity costs are glaring because Korea already spends about 5% of GDP on research and development – among the highest rates in the world. That hard-won intensity should be compounding into domestic capability: batteries and power electronics, grid storage and modernisation, chip tooling, and a public AI compute commons for universities and small and medium-sized enterprises (SMEs).

The logic of this bargain shifts the surplus instead to US yards and energy logistics. Whose industrial policy is being capitalised? The answer, on the numbers, is not Korea’s.

This economic coercion was also strategically packaged with a security sweetener: the public blessing for South Korea to acquire nuclear-powered submarines, reportedly to be built at US yards.

This gesture, while framed as a strategic upgrade, functions as the narrative adhesive that binds the lopsided cash-for-access deal into an alliance event.

The submarine flourish, however, ties a strategic knot around economics. Naval nuclear propulsion embeds fuel-cycle dependency, export-control gatekeeping, and supply-chain lock-in for decades. It locks Seoul deeper into US supply chains, significantly narrowing Korea’s room for multi-vector diplomacy and its ability to pursue independent regional equilibriums.

The price of ‘tariff relief’ thus becomes an exponential rise in dependency and a strategic lock-in to the US defence-industrial machine, underscoring how social-media declarations can outrun binding texts.

The protesters were correct to brand this agreement as one signed under protest.

The economic arithmetic is clear: the $350bn commitment is not just a trade imbalance. It is a siphoning of national wealth that the Korean Confederation of Trade Unions (KCTU) warns will inevitably fuel domestic austerity and wage suppression.

This is not about rejecting commerce, but about centring people in its terms.

If Washington insists on treating tariffs as a toll booth, Seoul’s answer must be hard conditions, not soft hopes.

The path to reclaiming sovereignty lies in legislating a domestic-investment floor: every outward dollar must be matched by an inward outlay into care infrastructure and green re-industrialisation, transforming fiscal leakage into domestic leverage.

Furthermore, labour guarantees must ensure that market access is not bought with wage cuts at home.

These demands – supported by Korea’s $422bn in reserves and a social state that still lags the OECD – are not maximalist. They are the grammar of sovereignty, forcing policy to favour the many over the few and ensuring that history records this moment as a popular push to build the commons, not pay tribute. – Globetrotter

Atul Chandra is a researcher at Tricontinental: Institute for Social Research. His areas of interest include geopolitics in Asia, left and progressive movements in the region, and struggles in the Global South.