[US New Security Strategy ③] Export and Trade Sophistication Based on 'Reciprocity'... Pressure from Capital Outflows and Exchange Rate Rise

U.S. NSS Heightens Uncertainty for Korean Economy
South Korea Faces Complex Export Challenges
"Agendas Benefiting Both Sides Must Be Prioritized"
Seeking Practical Gains Amid Easing U.S.-China Tensions
Concerns Over Capital Outflows Du

With the United States unveiling a new National Security Strategy (NSS) for the first time in three years, there is growing attention on its potential impact on the South Korean economy. The NSS clearly reflects the Donald Trump administration's tendency to demand compensation even from allied countries, making export and trade calculations even more complex. If external constraints such as geopolitical risks intensify, additional side effects such as capital outflows and a rise in exchange rates may occur. Some analysts suggest that changes in the U.S. stance toward China could also present new opportunities.

Cargo is stacked on a container ship docked at Busan Port. Photo by Kang Jinhyung

According to The Asia Business Daily's coverage on December 17, concerns are mounting that the United States' recently announced NSS, which prioritizes reducing the trade deficit, will prolong export uncertainties. Although concerns were temporarily eased with the conclusion of tariff negotiations in October, the U.S. has reaffirmed its intention to maintain its America-first and isolationist policies even toward allies. This suggests that various reciprocal transactions and negotiations may arise in the future. While this external environment could pose a significant burden for South Korea, given its export-oriented economic structure, there are also evaluations that opportunities must be sought within these changes.

The new NSS explicitly states, "The United States will prioritize rebalancing trade relationships, reducing the trade deficit, opposing export barriers, and eliminating dumping and other anti-competitive practices." It also emphasizes that "the U.S. will pursue trade agreements based on reciprocity," and that this approach will be applied equally to allied countries. The NSS mentions that various incentives will be provided to countries that align with U.S. export controls, stating, "We should offer incentives such as advanced technology cooperation, defense industry purchases, and access to U.S. capital markets to partner countries."

Kim Hyukjoong, Associate Research Fellow at the Korea Institute for International Economic Policy (KIEP), who specializes in North American studies, commented, "The U.S. has previously prioritized national security interests by unilaterally controlling exports or extending controls to goods from countries that do not comply." He added, "The new NSS indicates that export controls will no longer be viewed solely on a one-on-one basis, but rather in conjunction with various other issues." He further explained, "Depending on how future transactions are conducted, they could result in either benefits or disadvantages."

Kim went on to say, "For example, in the semiconductor sector, aligning with U.S. export controls could be interpreted as a way to gain preferential access to the U.S. market." He continued, "If a company follows not only U.S. export controls but also various economic security measures, it may suffer losses in securing access to the Chinese market. However, if transactions are handled well, it could facilitate entry into the U.S. market and draw support from the U.S. government." He emphasized, however, that "the focus should be on coordinating agendas that are mutually beneficial, rather than accepting one-sided demands."

Some observers are noting that while the U.S. has signaled its intention to keep China in check from an economic perspective, it has toned down its criticism compared to previous NSS documents. Given South Korea's economic structure, the country is inevitably caught between the U.S. and China. However, since the U.S. and China have shown signs of easing tensions following their summit in October, and with the possibility of direct dialogue between the two countries increasing, there may be new opportunities for South Korea. In fact, U.S. Treasury Secretary Scott Bessent recently indicated that the leaders of the two countries could meet up to four times next year.

Jimansoo, Senior Research Fellow at the Korea Institute of Finance, stated, "The U.S. may have moderated the tone of the NSS, considering both the limited impact of tariffs on China and the planned summits next year." He emphasized, "The most important task is to respond prudently while protecting our economic interests." He added, "It does not appear that the U.S. will try to involve its allies in bilateral issues with China until next year. In this sense, there is now some room for us between South Korea and China, so we should proceed to explore how best to utilize this space."

Some are also concerned that the new NSS, which calls on allies to share responsibility for protecting the first island chain-including the Taiwan issue and the straits connecting Japan, Taiwan, and the Philippines in Southeast Asia-while omitting references to North Korean denuclearization, could further increase external constraints on the South Korean economy due to geopolitical risks. In such cases, capital outflows may occur as foreign capital is withdrawn rather than invested in the domestic market. Additional risk factors, such as a rise in the won-dollar exchange rate, should also be closely monitored.

Heo Jeong, President of the Korean Association of International Trade and Professor of Economics at Sogang University, explained, "If the NSS sends negative signals about the overall credibility and soundness of the Korean economy, it could result in reduced inflows of foreign capital or even capital flight." He added, "This would naturally amplify the trend of a strong dollar and a weak won." He also stated, "The government would need to implement fiscal tightening to curb the high exchange rate, but with the current expansionary fiscal policy, this will be difficult. Next year, persistent high exchange rates along with inflationary pressures will be key economic issues."