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Was the KORUS FTA a Horrible Deal?

Author

Listed:
  • Hyeongwoo Kim
  • Madeline H. Kim
  • Divya Sadana
  • Peng Shao
  • Jie Zhang

Abstract

Donald Trump argued that the Korea-U.S. Free Trade Agreement (KORUS FTA) was a "horrible deal," pointing to a substantial increase in the U.S. trade deficit with Korea following the agreement's implementation in March 2012. Notably, during the same period, the U.S. trade balance with numerous other major trading partners, none of which maintained an FTA with the United States, also deteriorated, raising doubts as to whether the KORUS FTA was the primary cause of the observed imbalance. This study evaluates the causal effect of the KORUS FTA on the U.S.-Korea trade balance using a difference-in-differences framework, complemented by event-study and synthetic control analyses as robustness checks. The empirical findings, after accounting for business cycle fluctuations, provide overall support for Trump's assertion.

Suggested Citation

  • Hyeongwoo Kim & Madeline H. Kim & Divya Sadana & Peng Shao & Jie Zhang, 2025. "Was the KORUS FTA a Horrible Deal?," Auburn Economics Working Paper Series auwp2025-05, Department of Economics, Auburn University.
    • Handle: RePEc:abn:wpaper:auwp2025-05
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    File URL: https://cla.auburn.edu/econwp/Archives/2025/2025-05.pdf
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    References listed on IDEAS

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade

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