U.S. President Donald Trump speaks to journalists aboard Air Force One en route to South Korea in Japan, October 29, 2025.
Andrew Harnik | Getty Images News | Getty Images
President Donald Trump’s move last week to scale back annual military exercises with South Korea came after Seoul finalized hundreds of billions of dollars in investment commitments to Washington.
Experts said President Trump’s complaints about the slowdown in U.S. overseas military spending and South Korean investment indicate that alliances are shifting from one based on security to one based on economics.
Darcy Drout-Vellares, a fellow at the Carnegie Endowment for International Peace, said there are now questions about whether the investment will ensure the U.S. commitment to South Korea’s security that many in Seoul and Washington had hoped for. She was referring to the $350 billion South Korea pledged to invest in the United States last year in exchange for “reciprocal” tariff cuts.
“If we look at it differently, we might see a shift from a relationship centered around military alliances to one centered around an integrated industrial ecosystem,” Draut-Vellares said. It states that “the basis of the U.S.-South Korea partnership is economics, not security.”
President Trump said on August 16 that he had directed the Pentagon to halt military exercises because they are “costly” and send “inappropriate and hostile” signals to North Korea.
The post came around the time South Korean Trade Minister Kim Joong-kwang arrived in Washington, D.C., to discuss investment commitments and tariffs with Commerce Secretary Howard Lutnick.
Politico, citing people familiar with the matter, reported that the order was due in part to South Korea’s slower pace of investment development compared to Japan.
President Trump had canceled annual exercises in 2018 and even after his historic meeting with Kim Jong Un in Singapore. The Ulchi Freedom Shield exercise, which traces its roots to 1954, this year saw the participation of about 18,000 South Korean troops and an undisclosed number of U.S. soldiers.
The U.S. Department of Commerce and the South Korean Ministry of Trade did not respond to CNBC’s requests for comment.
Is it an investment for security?
Jennifer Kavanagh, senior fellow and director of military analysis at Defense Priorities, said allies are wrong to think that increased defense spending or economic partnerships will buy U.S. military involvement.
He said semiconductor trade and shipbuilding cooperation could continue apart from the US military presence in Asia.
“While the terms of exchange may change, a reduction in military presence in Asia and a set of reduced commitments will free up American economic resources to invest at home and abroad,” he said.
The two countries’ economies are deepening ties, especially as the South Korean semiconductor giant becomes the center of the global AI boom and Nvidia is its most important customer.
South Korean companies are benefiting from President Trump’s reindustrialization push aimed at gaining an advantage in competition with China.
Korean companies are significantly increasing investments in the semiconductor, electric vehicle, and shipbuilding sectors in the United States. For example, South Korean semiconductor giant SK Hynix is building a $4 billion advanced packaging factory in Indiana and has earmarked $10 billion to invest in new product lines and support its U.S. operations.
However, not all experts are convinced that reducing the size of the US military presence in Asia is in US interests.
Bruce Klingner, a former Central Intelligence Agency official in charge of Korea, said President Trump’s decision to curtail annual military exercises “further exacerbates allies’ concerns about the United States’ unreliability as a security and economic partner.”
He added that President Trump is trying to distract American voters from the Iran war ahead of November’s midterm elections.
Shortening military exercises does not appear to appease North Korea. South Korea’s Ministry of Defense announced Thursday that it launched more than 10 short-range ballistic missiles toward the East Sea.
Richard Haas, chairman emeritus of the Council on Foreign Relations, said on “Squawk Box” last week that President Trump’s decision undermines U.S. credibility and influence regarding North Korea.
An even bigger danger is the possibility that South Korea could pursue nuclear weapons to defend itself, which would “ultimately involve China and possibly Japan, so it would be incomparably worse,” he said. “That’s a big mistake.”
