Cho Yoon-je
The author is a special appointment professor at the Graduate School of Economics at Yonsei University.
The postwar order built on free trade and multilateralism brought unprecedented growth and prosperity to the world. Hundreds of millions escaped poverty, and Korea was among the greatest beneficiaries. Over the past decade, however, that order has been shaken severely. Growing tensions between the United States and China, shifts in U.S. tariff and foreign policies, the Russia-Ukraine war and the Iran war all point to a world moving toward a more unstable and dangerous order driven by power politics.
U.S. President Donald Trump, left, shakes hands with Chinese President Xi Jinping as they hold a bilateral meeting at Gimhae International Airport, on the sidelines of the APEC summit, in Busan on Oct. 30, 2025. [REUTERS/YONHAP]
Economics can no longer be viewed separately from national security. Technology, energy, supply chains and finance have all become strategic assets. This transformation is clearly not a temporary retreat from globalization but a structural shift in the international order. Political sentiment in major advanced economies has already changed, and support for globalization and open markets has weakened considerably.
The global system is being reorganized from efficiency-driven globalization into selective globalization centered on security concerns. Governments and corporations are no longer choosing production sites based solely on cost. They are increasingly seeking stable locations and trustworthy partners.
Yet globalization itself has not ended. Trade and investment continue to expand, though their direction is changing. Global trade volume rose 4.6 percent in 2025 despite U.S. tariff measures. Chinese exports to the United States fell sharply, but exports to Europe and Asia increased significantly. As Chinese exports begin threatening industries in those regions as well, protectionism has strengthened and global supply chains are being restructured.
Multilateralism has also not collapsed entirely. It survives in weakened form. International organizations such as the United Nations, the World Bank and the International Monetary Fund (IMF) have lost influence, but no alternative order has emerged to replace them. These institutions are increasingly reduced to maintaining the minimum level of cooperation possible amid great-power rivalry, yet the world still relies on them for crisis management and policy coordination.
This unstable situation is likely to persist for a considerable time. Competition between Washington and Beijing will not disappear quickly, while industrial policy and economic security strategies in many countries have already become deeply intertwined with domestic politics.
Where does Korea stand during this turbulent transition, and how should it respond? Korea is a middle-power economy ranked among the world’s largest, while also serving as a major producer in advanced manufacturing industries. At the same time, it remains highly dependent on external trade and global markets. Korea could emerge as one of the greatest beneficiaries of these structural changes or suffer significant damage from them. The country, therefore, needs not only adaptation but an active and strategic response.
First, Korea needs a system that integrates economic and security policymaking. Semiconductors, batteries, defense industries and shipbuilding are no longer simply commercial sectors. They have become central assets tied directly to national security and foreign policy. Supply chain restructuring and research and development, as well as work force, finance and energy policies must be approached in an integrated manner rather than separately. A centralized overseer capable of coordinating such efforts is needed.
Second, Korea must diversify its markets and supply chains while expanding system-based trade. Excessive dependence on either the United States or China should be avoided. Expanding economic cooperation with Southeast Asia, India, the Middle East and Europe is essential. The world increasingly seeks reliable systems rather than individual products alone. Korea should therefore pursue new trade strategies that combine defense exports, nuclear power plants, electricity grids, digital government systems, communications networks and infrastructure projects into broader packages.
A container ship sits at anchor as a small motorboat passes in the foreground in the Strait of Hormuz off Bandar Abbas, Iran, Saturday, May 2. (Amirhosein Khorgooi/ISNA via AP)
This approach offers Korea a major strategic advantage. Many middle-power and developing countries are struggling to navigate tensions between the United States and China. Korea can approach these nations with integrated economic and technological partnerships that function as both diplomatic and commercial assets.
Third, Korea must strengthen its economic safety net. Energy, food, shipping and data infrastructure are critical to national survival during crises. Strategic reserves and stable procurement systems should therefore be expanded. Korea remains highly dependent on imported energy and maritime shipping routes. Balanced expansion of both nuclear energy and renewable energy sources is necessary as well.
In the years ahead, gaps in the international order created by conflicts among major powers are likely to be filled partly through coalitions among middle powers and smaller multilateral partnerships. Korea is well-positioned to lead such cooperation in areas including digital trade, supply chains and development assistance. It should also support the preservation of weakened but still essential international institutions, including IMF quota reforms and the World Trade Organization’s dispute settlement system.
Korea has been one of the greatest beneficiaries of the multilateral free-trade order and will continue to depend heavily on it in the future. The world is now in the middle of a historic transition. Returning to the past will be difficult, yet a new order has not fully emerged. Korea can turn this transformation into an opportunity by maintaining openness while acting strategically, valuing alliances while securing autonomy and embracing a more active role as a middle power. Fortunately, Korea possesses economic strength and strategic assets built over the past 70 years. The real challenge lies in strengthening domestic capabilities and building institutions capable of using those assets strategically over the long term.
This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
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