Kids bike question

12 inch wheel bikes like this one:

are designed so that the pedals will not turn just by turning the wheels.
They are designed so that when the rider pedals the wheels turn.
Once some momentum is gained the rider can stop pedaling and the bike will coast forward. The rider engages the brakes by pedaling backwards - this is a coaster brake.

If your bike is a coaster brake bike you can visually identify a coaster brake bicycle by looking on the non-chain side of the bike for the brake strap.

There are many, many bikes in different colors and frame shapes with the same design.

Your bicycle was assembled incorrectly. Take it back to where you purchased it and ask that they fix or replace it, or take it to a bike shop to be assembled properly.

Let me also add a note in favor of @mattnz 's comment. Turning this into a balance bike may be the easiest solution. On the other hand, my child never took to a balance bike and needed outriggers.

I think my kids had similar difficulty in learning to pedal. My guess as to what you're describing is that even if the crank arms are totally vertical, he hasn't figured out how to push the top pedal forward to initiate the next pedal stroke. It might help to get him to point his toe down at the bottom of the stroke and point his toe up at the top of the stroke. This can help put force in the direction of rotation instead of pushing straight down towards the bottom bracket (where the cranks pass through the frame).