South Korea’s export strategy has long been shaped by two gravitational centers: the United States and China. Together, they still account for more than one-third of Korea’s total exports. This structure delivered remarkable growth over the past decades and underpinned Korea’s rise as a global manufacturing powerhouse. Yet as global trade becomes increasingly fragmented, politicized and regulation-driven, this concentration has shifted from a source of strength to a source of strategic vulnerability.

In 2025, Korea recorded a historic high of $709.7 billion in total exports. Of this, approximately $70 billion — about 10 percent — went to the European Union, making the EU Korea’s fourth-largest export destination after China, the United States and Southeast Asia.

The paradox is striking. The EU is one of the world’s largest import markets, comparable in overall economic scale to China and significantly larger than the US in terms of total goods imports. Yet Korea has not given Europe the same level of strategic focus as Washington or Beijing.

This imbalance is even more evident in the defense sector. Korea’s arms exports reached roughly $15 billion in 2025, with more than half absorbed by EU and NATO countries. Europe has already emerged as a key destination for Korea’s defense industry — even without a fully articulated national strategy toward the EU market. This suggests that Korea’s potential in Europe is not theoretical, but already tangible and underleveraged.

As Korea enters 2026, correcting this imbalance is no longer optional. It is a strategic necessity.

The European Union is not a peripheral market. With 27 member states, a population of roughly 450 million and high per capita income levels, it represents the world’s largest unified import market. European demand is structurally different from that of China or the US. It is less volatile, more diversified and anchored in long-term regulatory and institutional frameworks rather than short-term political cycles.

For Korean exporters, this distinction matters. While the US market offers scale and speed, it also carries growing political risk and industrial policy uncertainty amid MAGA initiatives. China, once Korea’s fastest-growing export destination, now faces slowing growth, rising self-reliance and heightened geopolitical friction. Europe, by contrast, offers relative stability, rules-based predictability and sustained demand for high-value industrial goods — precisely where Korea’s comparative strengths lie.

Automobiles, machinery, shipbuilding, advanced materials, batteries and clean-energy equipment align well with European demand. Moreover, Europe’s accelerated defense rearmament and green transition are opening new opportunities in areas where Korean firms already possess global competitiveness, including artillery systems, armored vehicles, naval platforms, energy storage systems and hydrogen-related technologies.

The challenge Korea faces in Europe is not market size, but market access under evolving rules. Unlike the US or China, the EU increasingly governs trade through regulation rather than tariffs. Instruments such as the Carbon Border Adjustment Mechanism and the Corporate Sustainability Due Diligence Directive are reshaping how non-EU companies participate in the European market.

For many Korean firms — particularly small and medium-sized suppliers — these rules appear to be barriers. In reality, they function as filters. The EU is not closing its market; it is raising the threshold for participation, favoring companies that can demonstrate transparency, sustainability and long-term commitment.

CBAM requires verified carbon-emissions data for energy-intensive products such as steel and aluminum, turning carbon competitiveness into a core trade factor. CSDDD extends responsibility across supply chains, obliging firms to demonstrate credible human-rights and environmental due diligence beyond first-tier suppliers. In defense procurement, Europe increasingly prioritizes suppliers that contribute to European industrial resilience, interoperability and life-cycle support, not merely those that deliver finished products at the lowest price.

These requirements are costly to ignore, but powerful if mastered.

Korea’s mistake would be to treat EU regulations as external constraints rather than strategic signals. Europe is clearly defining the type of partners it seeks low-carbon, transparent, reliable and embedded in long-term industrial ecosystems.

Korean companies are well-positioned to meet these expectations. Korea’s manufacturing base is technologically advanced, its firms are accustomed to strict quality and compliance standards and its government has experience coordinating large-scale industrial transitions. What has been missing is a coherent national strategy to translate these strengths into sustained European market leadership.

This requires three strategic shifts.

First, Korea must elevate the EU from a “diversification option” to a core pillar of export strategy, on par with the US and China. This means targeted diplomatic engagement, sustained industrial dialogue and sector-specific road maps for Europe — not generic trade promotion or short-term sales missions.

Second, compliance capacity must be treated as export infrastructure. Carbon measurement, supply-chain traceability and sustainability reporting systems should be supported at the national level, particularly for SMEs that form the backbone of Korea’s export ecosystem. Without this support, European regulations risk hollowing out Korea’s supplier base rather than strengthening it.

Third, Korea must move beyond pure export-oriented growth toward a deeper, more sustainable industrial presence in Europe. This does not require large-scale relocation, but selective investment in assembly, maintenance, sustainment, joint R&D and long-term partnerships that anchor Korean firms within European value chains. In defense, energy and advanced manufacturing, proximity increasingly matters — not only for delivery speed, but for interoperability, life-cycle support and industrial trust.

For the defense industry, Korea should pursue a proactive role as a non-EU partner by contributing financially and technologically to Europe’s innovation and capability-development ecosystem, in a manner comparable to participation in Horizon-type R&D programs. By co-investing in joint research, testing and industrial cooperation frameworks, Korea can position itself not merely as an external supplier but as a committed stakeholder in Europe’s long-term security and industrial resilience.

Europe may not replace the United States or China in Korea’s export structure in the near future. The objective is balance, not substitution. By increasing the EU’s share of exports over the next decade, Korea can reduce its geopolitical exposure while securing access to the world’s most highly regulated, high-value market.

For Korea, the question in 2026 is not whether Europe is difficult. The question is whether Korea can afford not to focus on a market that rewards exactly the kind of industrial sophistication it already possesses.

Man-Ki Kim

Man-Ki Kim is a professor at the KAIST Graduate School of Future Strategy, specializing in global public procurement, defense acquisition innovation and global strategic trends. He also serves as a senior adviser at Yulchon. The views expressed here are the writer’s own. — Ed.

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