U.S. Seeks New Alliance Form: Allied Onshoring with South Korea

A closer look at recent U.S. industrial policies reveals the contours of the 'allied industrial base cooperation' that the U.S. is pursuing. While past strategies relied on subsidies or tax incentives to attract foreign private investment, a new model has emerged where the government shares business risks through policy finance and direct investment. The government is no longer just a supporter but a shareholder or partner directly involved in strategic industries. This shift also explains why negotiations between South Korea and the U.S. on strategic investments are becoming more complex and prolonged. Core industries tied to national security are no longer left solely to market forces. The U.S. government is mobilizing all policy tools—tariffs, regulations, government procurement, and direct investment—to rebuild a production base centered on the U.S. This differs from past industrial attraction policies that promised tax benefits for 'Made in the USA.' If needed, tariffs adjust cost disparities, policy finance reduces investment risks, and government procurement creates initial demand. In strategic industries, the government even participates as a direct equity investor. As the U.S. restores its industrial base, the role of allies is expanding from security partners to industrial partners providing production, technology, and capital. While the Biden administration focused on 'friendshoring' to diversify supply chains with trusted allies, the Trump second-term administration prioritizes integrating allies' capital, technology, and operational capabilities into the U.S. industrial base. The author calls this 'allied onshoring.' It is not an official U.S. policy term but a way to describe recent U.S. policy directions and industrial cooperation with allies. Allied onshoring combines allies' technology, capital, and production capabilities with the U.S. industrial ecosystem to build production capacity within the U.S. Hanwha's Philadelphia shipyard project and Korea Zinc's Tennessee Integrated Smelter exemplify this strategic shift. Both projects share a common goal: strengthening the U.S. industrial base and reducing reliance on China using South Korea's capital, technology, and operational expertise. While the former aims to expand final product production, the latter seeks to secure strategic mineral processing capabilities, fortifying the entire U.S. supply chain for critical minerals. The U.S. is moving beyond 'factory attraction' to sustainably expand its industrial base with allies. By integrating allies' technology, capital, supply chains, workforce, and operational experience into the U.S. industrial ecosystem, it aims to build lasting production capabilities domestically. If these cases succeed, they could set a new standard for South Korea-U.S. industrial cooperation, extending to defense, aerospace, semiconductors, AI, automotive, and battery sectors. However, South Korea faces significant challenges. How much of its decades-acquired technology to share with the U.S. directly impacts national industrial competitiveness. Expanding investments in the U.S. must be carefully evaluated to avoid weakening domestic industrial bases—a phenomenon known as industrial hollowing-out. Economic ties with China also cannot be ignored. Yet, South Korea-U.S. industrial cooperation should not be viewed solely through the lens of 'technology transfer.' The focus should extend beyond what South Korea can offer to what industrial opportunities it can secure in the process. A structure must be created where South Korean technology, U.S. capital, markets, and policy support combine to build new production capabilities in the U.S. while providing Korean companies with stable market access and business expansion opportunities. The U.S. government must also establish institutional frameworks to ensure Korean investments lead to long-term projects in the U.S. Future South Korea-U.S. industrial cooperation should prioritize 'technology collaboration' over technology transfer and 'joint production' over production relocation. Joint production is not a universal model but a phased approach starting with strategic industries like shipbuilding and defense. The key is for both nations to combine capital, technology, markets, and policy tools to jointly build strategic industrial production capacities and share investment risks and market opportunities. Ultimately, the U.S. seeks allies that co-build the industrial bases necessary for security. The future of the South Korea-U.S. alliance lies not in defending more together but in 'creating more together.' If South Korea proactively engages with this shift, the U.S. industrial revival could become an opportunity for both nations to expand their industrial bases as economic security partners—rather than a one-sided burden on South Korea.