Trump says Korea is freeloading off the U.S. Data shows the opposite is true.

Apple retail employees and customers celebrate the opening of Apple Hongdae in Mapo District, western Seoul on Jan. 20, 2024. Apple Hongdae is the U.S. tech company's seventh retail store in Korea. [YONHAP]

 
Wears Nike, uses an iPhone, tunes into Netflix and eats McDonald's for lunch — such is the daily life of an ordinary Korean, surrounded by American products. 
 
U.S. President Donald Trump is engaging in a trade war with the world, and Korea is no exception. The administration is floating a policy aiming to penalize companies that export goods to the United States, even those that have made substantial investments in the country and created thousands of high-quality jobs. 
 
The JoongAng Ilbo, an affiliate of the Korea JoongAng Daily, delved into the tax payments, employment and donations of the top 20 U.S.-listed firms operating in Korea between 2021 and 2023.
 
The 20 biggest U.S.-listed firms operating in Korea include Microsoft, Apple, Netflix, Google, IBM, Oracle and Dell Technologies in tech; Tesla, General Motors, 3M, Otis and Cisco in manufacturing; Nike, McDonald’s, P&G and Philip Morris International in retail; Pfizer and MSD in pharmaceuticals; and financial firm AIG. The JoongAng Ilbo's dataset also includes the Korean firm Lina Life Insurance Korea, which was owned by the Connecticut-based Cigna Group until July 2022 and then acquired by Chubb, which is listed on the New York Stock Exchange but incorporated and headquartered in Switzerland.
 
The combined revenue of the 20 firms rose from 32.77 trillion won ($22.4 billion) in 2021 to 37.95 trillion won in 2022 and to 42 trillion won in 2023, according to data from the Financial Supervisory Service and the Ministry of Employment and Labor.
 
At the same time, their yearly operating profit surged from 782.5 billion won in 2021 to 3.27 trillion won in 2023, with 13 out of 20 firms reporting an increase in operating profit during the two years.
 
But the corporate tax paid by the same companies remained at 557.3 billion won, approximately 1.5 percent of their average yearly revenue.
 
In comparison, Naver, a Korean portal giant operator, which logged 9.67 trillion won in revenue in the same period, paid 5.1 percent of its yearly revenue in corporate tax, or 496.4 billion won.
 
“Looking at how the Korean firms in the U.S. pay a massive amount of corporate tax and are positively involved in employment and donation, [the numbers] are hard to compare,” Sejong University Graduate School of Business Prof. Kim Dae-jong said.
 
“It’s difficult to see that U.S. firms are being ‘responsible’ in their management when you also take account the common criticisms of how U.S. Big Tech companies reduce their revenue, are suspected of tax evasion and send back royalties to their headquarters.”
 
Some have accused foreign companies operating in Korea of reducing their corporate tax burden by increasing their operating expenses to reduce its operating profit — as corporate taxes are charged not on revenue, but on operating profit.
 
Apple Korea is a representative example of a U.S. firm doing business in Korea that has been accused of reducing its corporate tax burden by inflating its operating expenses: Its corporate tax burden fell from 200.6 billion won to 82.5 billion between 2023 and 2024 as it bumped up its cost-to-sales ratio from 88.7 percent to 92.2 percent. 
 
Big Tech firms typically record a 20 to 30 percent operating profit margin, but their Korean operations report a single-digit ratio: Google Korea reported a 6.4 percent profit margin while Microsoft Korea logged 4.7 percent and Netflix Services Korea reported 1.5 percent in 2023 — arousing suspicion that they were dodging taxes by transferring profits made in Korea elsewhere.
 
Google Korea, similarly, has been accused of evading taxes by having its Singaporean affiliate, Google Asia Pacific, recognize part of its revenue to downsize its own revenue.
 
According to 2023 research conducted by Hanyang University professors Kang Hyoung-goo and Jeon Seong-min, Google Korea logged revenue of 12.1 trillion won in 2023 compared to the 365.3 billion won recognized in its audit report. Google Korea managed to evade corporate tax amounting to more than 500 billion won if the report is true.
 
Professor Jeon pointed out that such actions are unfair to other firms and might feel like an “uneven playing field” to the Korean firms.
 
American firms' contribution to Korea's job market is rather small: 18 U.S. corporations operating in Korea last year, according to the Ministry of Employment and Labor, hired 23,019 full-time workers, down 1.3 percent on year. While McDonald’s topped the hire count with 16,487 employees, 89 percent of those employees worked part-time.


James Kim, chairman and CEO of the American Chamber of Commerce in Korea, told the JoongAng Ilbo he was confident that U.S. firms are “adhering to laws,” and that the country takes tax issues very seriously.
 
Korean enterprises operating in the United States, conversely, are estimated by the JoongAng Ilbo to have employed more than 140,000 workers in 2024, with an average annual salary of $104,000, 19.5 percent higher than the average wage paid by other non-American firms doing business there. 
 
“U.S. firms in Korea are half-hearted in investing or promoting in Korea, unless they are selling consumer products,” Catholic University of Korea Associate Prof. Yang Jun-sok said. “But Korean firms in the U.S. are very active with their investments and creating employment.”
 
An industry source who wished to remain anonymous told JoongAng Ilbo that Korean subsidiaries of U.S. firms are just “money machines” that merely manage their revenue and profit, not proper businesses.

U.S. President Donald Trump on Feb. 28 [REUTERS/YONHAP]

 
The Trump administration has repeatedly stated that countries that run a trade surplus with the United States must pay for their actions. While Korea's trade surplus with the nation stood at $56.7 billion in 2024, U.S. firms are also gaining a lot of both tangible and intangible benefits from Korean businesses.
 
Korea was the most prominent investor in U.S. greenfields in 2023 and 2024, with Samsung Electronics claiming that its Taylor, Texas semiconductor plant will have an economic impact of $26.8 billion in 2023. Samsung Austin Semiconductor, alone, also pays $245 million in tax to the state every year — 64 percent of the tax paid by the 20 U.S.-listed, Korea-operating firms discussed earlier. 
 
“We have been using defensive strategies, saying that Korean firms are investing and hiring a lot of employees in the United States,” said Kim Heung-chong, professor by special appointment at Korea University's Graduate School of International Studies.
 
“But we should now prepare a more offensive strategy in our future negotiations now that Korea is an important market for American companies, and they profit from Korea as well.” 
 

BY KIM KI-HWAN, CHOI SUN-EUL, NA SANG-HYEON and NOH YU-RIM [cho.yongjun1@joongang.co.kr]