Economic and Security Storm Looms as Lee Jae-myung Assumes Presidency

Lee Jae-myung has taken office as President of South Korea under extraordinary circumstances, following the impeachment of his predecessor, Yoon Suk Yeol.

There will be no customary transition period; Lee assumes immediate responsibility, tasked with stabilising a divided nation still reeling from a failed attempt at martial law and an economy in contraction.

Yet the most urgent challenge facing President Lee does not lie within South Korea’s borders. Instead, it emanates from Washington. With Donald Trump back in the White House, South Korea is confronting a series of potential shocks: punitive tariffs, military cost-sharing disputes, and an unpredictable US posture toward both North Korea and China.

Trump’s decision in April to impose 25% tariffs on all South Korean imports, on top of existing duties on steel and automobiles, stunned Seoul. These measures were announced unilaterally, despite longstanding defence ties and a free trade agreement between the two countries. According to Moon Chung-in, a senior adviser to Lee’s Democratic Party, these tariffs could “trigger an economic crisis” if enforced.

South Korea’s economy was already under pressure. The disruption caused by Yoon’s attempt to impose martial law, coupled with declining global demand, led to negative growth in the first quarter. Economic recovery is a top priority for voters, yet President Lee must first navigate US trade policy under a transactional administration that blurs the lines between economics and security.

In April, Trump posted on his Truth Social platform that he had discussed “payment for the big time military protection” provided to South Korea as part of his trade talks. This language echoes his first term, during which he threatened to withdraw US forces from the Korean Peninsula unless Seoul significantly increased its financial contributions. Now, the risk is not merely financial but strategic.

The United States maintains a security guarantee to South Korea, with 28,500 troops stationed in the country. These forces serve both as a deterrent against North Korea and as a broader element of the US presence in Asia. However, Washington’s strategic calculus appears to be shifting.

Recent statements by US defence officials suggest that South Korea may be expected to assume greater responsibility for its own defence. Elbridge Colby, now a senior Pentagon figure, has stated that Seoul should prepare to defend itself against Pyongyang so that US forces can be redeployed to counter China, particularly in a Taiwan contingency.

This presents a geopolitical dilemma for President Lee, who has historically expressed scepticism toward US military strategy in the region. He has stated that South Korea should “keep its distance” from a potential China–Taiwan conflict, arguing that the country can maintain balanced relations with both Washington and Beijing.

Moon Chung-in, a former national security adviser, warned of the risk of entrapment. “We are worried about America abandoning us, but at the same time we are worried about being entrapped in American strategy to contain and encircle China,” he said. The possibility of South Korean troops being asked to contribute to operations targeting China is likely to provoke further domestic debate.

Meanwhile, Pyongyang is watching developments closely. Kim Jong Un’s nuclear arsenal is now more advanced than it was during Trump’s first term. In 2019, summit talks between Trump and Kim collapsed without agreement. Yet Trump has signalled interest in resuming negotiations.

There is concern in Seoul that Trump might strike a deal focused solely on US security—namely, eliminating North Korean intercontinental ballistic missiles—while overlooking the short-range systems that threaten South Korea. In return, Kim could demand a reduction of the US military presence in the South or even recognition as a nuclear weapons state.

According to Sydney Seiler, a former US negotiator, “The idea there might be some sort of troop withdrawal [included in a deal] is really not that far-fetched.” He advised President Lee to move quickly to engage the Trump administration and ensure that Seoul has a seat at the table in any future talks.

Evans Revere, a former US diplomat, described the current scenario as a potential “perfect storm,” with the new South Korean leadership, Trump’s return, and shifting regional dynamics creating a volatile mix. “If this plays out poorly, it would undermine peace and stability in North East Asia,” he said.

In seeking to avert this crisis, President Lee’s administration is highlighting South Korea’s industrial capabilities. The country is the world’s second-largest shipbuilder after China. Seoul is offering to build, repair, and maintain naval vessels for the US, leveraging its expertise to reinforce its strategic value.

“US shipbuilding difficulties are affecting their national security,” said Jeong Woo Maan of Hyundai Heavy Industries. “This is one of the strongest cards we have to negotiate with.”

Having campaigned on restoring democracy and unity, President Lee now finds his attention consumed by foreign policy. With no time to spare, he must convince a sceptical Washington that South Korea remains a vital ally—not just in terms of defence, but also in maintaining regional balance in an increasingly fractured Asia-Pacific.

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