Trend Megatrend 3: Decline and reordering of the free-trade system

Summary

KDI argues that the free-trade order built after the Second World War is being structurally reorganised rather than temporarily weakened. Its core logic is weaponised interdependence, a concept from Farrell and Newman in which states that control central nodes of global networks use those connections for coercion. Examples include the US dollar payment system and advanced technology, and China's grip on critical minerals and manufacturing ecosystems. Recent export controls on chips, gallium, germanium and rare earths, and a tactical US-China tariff truce in 2025, illustrate the shift toward systemic rivalry. For Korea, with exports near 40% of GDP, deglobalisation hits harder than for most advanced economies, though its irreplaceable role in chips and batteries also offers leverage.