The South Korean government’s procurement practices, particularly regarding defense supplies and security certification of information and communications technology equipment, are expected to be discussed during an upcoming bilateral trade dialogue with the United States.

During the bilateral meeting, involving both countries’ finance and trade ministers and scheduled for Thursday in Washington D.C., U.S. officials are likely to raise concerns over Korea’s procurement system, which was recently cited as an unfair trade practice by U.S. trade authorities.

In its National Trade Estimate Report released in March 2025, the Office of the U.S. Trade Representative (USTR) criticized Korea’s procurement practices, noting that the Korean government often requires technology transfers or the use of domestic components when awarding large-scale defense contracts.

A Korean government official said representatives from relevant ministries will attend the talks and listen closely to the U.S’ views. In addition to the Ministry of Economy and Finance and the Ministry of Trade, Industry and Energy, other ministries, including the Ministry of Science and ICT, the Ministry of Land, Infrastructure and Transport, the Ministry of Environment, the Ministry of Agriculture, Food and Rural Affairs, and the Ministry of Health and Welfare will also participate.

Agenda items are expected to include the export of high-definition map data, restrictions on U.S. beef and rice imports, and network usage fees, with a comprehensive follow-up review by the participating ministries anticipated.

As government procurement emerges as a focal point in Korea-U.S. tariff negotiations, the future of Korea’s defense offset agreements is coming under scrutiny. The relevant Korean law provides to “promote” offset trade for contracts over $10 million. Such arrangements require foreign suppliers to transfer technology or purchase Korean-made products in return for large-scale sales. Korea’s offset trade volume with the U.S. currently totals $5.8 billion.

The domestic defense industry warns that relaxing or eliminating offsets could reduce opportunities for local companies to supply components or manufacture foreign defense equipment under technology transfer deals. Concerns are especially pronounced among small and mid-sized companies.

The United States is also pressing Korea to ease restrictions in the public cloud sector, citing limited market access for major cloud providers such as Amazon Web Services Inc. (AWS), Microsoft Corp.’s Azure, and Google LLC’s Google Cloud Platform. Additionally, Korean public institutions require National Intelligence Service (NIS) certification for devices with encryption features - a policy the United States wants relaxed.

Korea’s public sector has traditionally provided growth opportunities for domestic cloud providers. If security regulations are loosened, however, global tech giants are expected to step up efforts to expand in the Korean public cloud market.

Meanwhile, Korean industries are already feeling the strain from U.S. customs enforcement ahead of tariff negotions. According to the trade ministry, a government-wide customs response task force received 3,022 tariff-related inquiries in the past two months, with 68 percent involving customs issues.

The shipping sector is also bracing for impact. A Ministry of Oceans and Fisheries official said that due to escalating U.S.-China trade tensions and new tariffs, Chinese cargo shipments to the United States could drop by 30 to 60 percent. Shipping capacity on Asia-North America routes fell by up to 14 percent from the previous week in the third week of April 2025 according to global shipping operators, the official added.

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