Rising protectionism poses new risks for Korean exports

The saying that people eventually resemble what they criticize seems increasingly fitting. Countries that once warned that protectionism would damage the global economy are steadily adjusting their positions. Criticism that the United States’ high tariff policies represent a retreat from free trade has grown quieter. Instead, a growing number of governments are introducing laws and regulations designed to shield their domestic industries.

After the United States, long a self-declared defender of free trade, shifted its stance, governments elsewhere began calculating their own responses. One by one, they are building similar trade barriers. The European Union stands out as a leading example. The bloc began implementing the Carbon Border Adjustment Mechanism on Tuesday, a policy widely viewed as a form of carbon tariff. Companies exporting goods to the EU must report the carbon emissions generated during production and pay a corresponding cost.

The EU has also introduced the Net-Zero Industry Act, effectively formalizing a “Made in Europe first” principle. The policy is framed in terms of decarbonization and fair competition. Yet it also reflects a strategic effort to counter the growing presence of Chinese products in European markets.

The challenge is that such barriers rarely remain confined to a single country. Regulations originally aimed at China are increasingly affecting South Korean companies as well. The burden of carbon-related costs has already become a reality. At the same time, pressure is intensifying for firms to expand local electric vehicle assembly lines.

The broader climate is even more troubling. European countries are increasingly emphasizing “Buy European” policies and strengthening calls for cooperation among members of the North Atlantic Treaty Organization. In several major defense procurement competitions, South Korean companies have seen contracts slip away to European rivals at the final stage.

Late last year, Sweden’s Saab unexpectedly surpassed South Korea to win an 8 trillion won submarine contract from Poland. In Canada’s ongoing submarine procurement project, “Team Korea” is locked in a difficult contest with Germany’s ThyssenKrupp Marine Systems. The German bidder is widely seen as benefiting from what some observers describe as a NATO alliance framework. Analysts say the decisive factor is often no longer performance or price, but regional and political considerations. In simple terms, procurement is increasingly tilting toward suppliers within the same strategic bloc.

South Korea’s manufacturing sector now finds itself at the center of this changing trade battlefield. The country’s core industries, including automobiles, batteries, steel, machinery and defense, are deeply tied to markets in the United States and Europe. The traditional formula for success, built on technological strength and reliable delivery, no longer guarantees victory.

To remain competitive, South Korea must go beyond technological advantage and help shape the standards themselves. That could mean taking the lead in establishing technical standards and becoming a rule-setter in regulatory design. It could also require securing a critical position in global supply chains that makes Korean industries indispensable. Localization strategies must also become more sophisticated. Instead of simply relocating production facilities, companies need to integrate into local industrial ecosystems and provide what host countries truly seek.

The government must also adapt to the new environment. Rather than acting solely as a negotiator, it must become an architect that helps shape the broader framework of trade and industrial policy. A unified strategy between government and industry is no longer optional. It has become essential.

Following the challenge posed by U.S. tariffs, Europe’s emerging trade barriers represent a second major test. The year 2026 could become a turning point for South Korea’s export-driven economy. Having grown within a global system built on free trade, the country now faces the task of navigating against the rising tide of protectionism. This is no longer a battleground for companies alone. The depth and coherence of strategies forged jointly by government and industry will soon face a decisive test.