Like many other relationships, the US-South Korea relationship is shaking.
Just a few months ago, the link between Washington and Seoul was a bright spot for the US in Asia, as relations with China and India soured. The main concerns that US President Donald Trump had raised in his first term, like South Korea paying more for security, had not materialized in his second term (yet). Like Japan, South Korea had pledged hundreds of billions to invest in the US economy.
Then, a curveball: US immigration officials raided a Hyundai plant in Georgia last month, detaining 475 people, most of whom were Korean nationals. The US alleged they were working illegally in the country. Hundreds of workers were repatriated back to South Korea, even though the US government offered to let some stay—an offer turned down by almost everybody.
This has culminated in perhaps the biggest disruption to US-South Korea ties in modern times. The friction has spilled into the public as the South Korean prime minister, Kim Min-seok, says his nation’s economic projects in the US will be halted until the “visa issue” is fixed.
America is not budging. South Korea is angry. A new flashpoint is forming between two close allies that threatens to change the dynamics of Asia, technology, and the world.
Geopolitical Blowback
A big consequence of the disrupted US-South Korea ties has flown under the radar: two isolated geopolitical projects have intersected.
The US goal of attracting huge foreign investment, to reestablish competitiveness in the face of a rising China, has collided with the US goal of deporting millions of people from the country.
This connects US foreign investment with US deportation. The nationalities the US goes after could have a ricochet effect on foreign governments, who decide to punish America for the changing visa and immigration policies. South Korea is not the only nation whose people are in limbo. There are also Indian H-1B holders, Mexican agricultural workers, Chinese students, and more. Some of these governments are already colliding with Washington (like Beijing). Others are biting their tongue or even trying to appease America (like Mexico raising the tariffs on certain Chinese imports to 50%).
All sides could soon strike back at America based on immigration. Could India pause foreign investment in the US if H-1B policies are not reversed, or if Indian workers are detained next?
This is not just about convergence between foreign investment and deportation. It is also about geopolitical blowback.
America is dealing with the unexpected consequences of its deportation drive, like close US allies zipping up their wallets. The pressure is rising on the US to pick which “project” is more important: removing millions of people and infuriating governments across the globe, or attracting trillions from foreign investors and businesses. And, if the US pursues the former, it has to accept that key relationships, alliances, and the US footprint could all begin to destabilize.
New Tech Confrontation
As US-South Korea ties rock back and forth, the White House has set its focus on another Asian tech power: Taiwan. Radical new chip ideas have been proposed, like 1:1 ratio rules.
“…which would force chip firms to match foreign chip imports with local chip production—or face a tariff. If Nvidia imports 100,000 chips annually, the new rules would pressure it to also build 100,000 chips locally every year. Except, how does Nvidia do this, as it is a fabless company? The new 1:1 ratio rules force the entire chip world to integrate on a new axis—where firms like Nvidia enter into new initiatives with manufacturers like TSMC or Samsung to support America First, which seeks to compete with China in new ways. The pressure is now on chip companies to establish new setups that have tariffs and geopolitics at their center.”
Like with Taiwan, if US-South Korea relations continue to decline, America could put Korea in the tech crosshairs. The US may decide to restrict Korean tech imports or force its companies to stop using Korean fabs. Already, the US has begun rescinding licenses that allow Korean (and other) businesses to import advanced US equipment into China.
The conditions are being laid down for the US and South Korea to clash on tech. Either America could build walls against Korean technology. Or, South Korea could retaliate and build walls against American technology.
And, those thinking South Korea will remain in the American technology corner should think twice. Last month, the Korean government launched a $390 million strategy to build sovereign AI and sever its dependency on foreign AI systems—particularly LLMs from the US and China.
This is the “technology climate” America and South Korea are locking horns in.
Financial Divergence
In early September, when the US and Japan finalized a new trade deal, Tokyo had earmarked $550 billion to invest in the US. This massive number, more than half a trillion dollars, only reinforced how global investment was becoming America First, after the mammoth deals signed in the Middle East.
Except, confusion soon emerged over who controlled the $550 billion. On paper, it was Japan’s money to invest. In the White House, the money was America’s, to be handed over like change in the pocket. This has resulted in Japan announcing a new “vehicle” controlled by Japan Bank for International Cooperation (JBIC) that will hand out the $550 billion to US firms, from equity to loans. Yet, in the US, there are calls for Japan’s cash to be invested (by America) in factories and industrial plants in the country as part of a new manufacturing revival.
This same confusion with Japan has emerged with South Korea. The $350 billion investment that South Korea proposed as part of its trade deal in the form of loans and equity has been interpreted differently in America. The White House wants Seoul to hand over the cash, like with Japan, a directive that South Korea has flatly rejected. The Korean national security advisor Sung-lac has said, “We are not able to pay $350 billion in cash.”
The US is at odds with its two closest Asian allies on the same issue. But this is far more than a difference of opinion. It is about the new US position as the rallying cry of America First grows louder. The old financial and economic rules are being pushed aside. Now, the US wants nations to put up money, almost like collateral, to ensure they are treated fairly (i.e., no tariffs).
This changes how other nations will dance with America. The world may start to commit less in investment pledges if Washington is demanding hundreds of billions of dollars in liquid cash up front.
At the same time, as capital flows to America, the dollar’s strength will inevitably rise. At a moment when America wants to bolster exports to the world, this could come in the way, once again causing a new convergence between different geopolitics.
Regional Status Quo
The US “reset” with North Korea, which took place during Trump’s first term, has not occurred for now. But it remains on the table. However, unlike several years ago, when Trump met with Kim Jong Un, and US-South Korea ties were steadfast, the situation is different today.
The US could be engaging in outreach with Pyongyang, as the US relationship with South Korea bounces. This would introduce a different status quo in North Asia and the broader Indo-Pacific. And it would force South Korea to fundamentally rethink its overall reliance on the US for security and defense. Just as Washington’s directive (or threat) to Taiwan to move 50% of chip production to the US or lose protection is likely to shock Taipei, a future US-North Korea summit without patching up US-South Korea relations is likely to do the same to Seoul.
Who will South Korea turn to? Ideas of sovereignty and self-reliance are brought into the spotlight. And for the US chief adversaries, like China and Russia, uncertainty around America’s footprint on the Korean Peninsula will be welcomed—and likely exploited.
However, for the US, this cannot treat this as insignificant.
Because part of the new status quo in Asia is the commitment between China, Russia, and North Korea toward one another.
This is an alliance I have discussed several times. When North Korean troops began fighting for Russia, I warned what this meant: Beijing, Moscow, and Pyongyang are now willing to spill blood for one another. As the US Pentagon warns its generals and admirals to “prepare for war,” America has to consider all this. Fighting with South Korea on economics is coming at a moment when the US is facing a united front between China, Russia, and North Korea on security.
Conclusion
All over the world, America’s relationship with friend and foe is undergoing historic change. Few know what will happen next. But what is clear is that the old status quo is gone.
This also applies to the US and South Korea. Even if both sides rekindle, that deep connection has been eroded, similar to what has taken place between the US and India or the US and the EU.
For South Korea, it is on the precipice of drawing up a new strategy that goes beyond the US, from defense to economy. This could result in tighter integration between Seoul and Tokyo, or even new outreach to China.
For the US, however, the stakes are different (and bigger). The US is at loggerheads with nations throughout Asia. Now add South Korea. Who will be next?
And, if this is the new state of play between America and the world’s new center of gravity (Asia), a moment could soon arrive when nations outright reject Washington’s demands, where more doors are closed to America than open.
-ABISHUR PRAKASH AKA. MR. GEOPOLITICS
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