As a snap election approaches, South Korea’s rival parties pledge to prioritise the economy and livelihoods, but the leaderless nation remains constrained in addressing its biggest challenge — Trump’s tariffs.
The country’s Constitutional Court ousted impeached President Yoon Suk Yeol on Friday over his shock martial law attempt in December, triggering a new election within 60 days.
Political Instability
Asia’s fourth-largest economy and a staunch U.S. ally, South Korea has been governed for almost four months by a revolving pair of interim presidents who have struggled to orchestrate an effective response to U.S. President Donald Trump’s sweeping tariffs, which stand to hit the export-reliant country hard.
“For the next two months, Seoul will not be able to properly respond to Trump’s fast-paced decisions, let alone coordinate with Washington on key foreign policy challenges, which could impact South Korea’s national security and economic security in significant ways,” said Duyeon Kim, of the U.S.-based Center for a New American Security.
In the wake of the court ruling, Lee Jae-myung, leader of the main opposition Democratic Party (DP) and presumptive frontrunner in the election, promised to “rebuild broken livelihoods, peace, economy, and democracy with the spirit of great unity.”
One DP official said Lee is expected to step down as party leader within days so he can run for president.
“After that the party will focus on people’s livelihoods,” said the official, who spoke on condition of anonymity since the issues were discussed within the party.
Kweon Seong-dong, the floor leader of the ruling People Power Party (PPP), called Lee “dangerous” and cited the need for the conservative party to do its best to overcome economic headwinds.
“Now, with the global tariff war taking place outside, our economy is in an emergency state, and the people’s economy is in a serious situation,” he said.
Key Concerns
Shoring up growth is a key concern for the government, and any winning candidate will need to respond effectively to changes in U.S. tariff policy under Trump.
On Thursday, the U.S. said it would impose 25% reciprocal tariffs on South Korea as part of its new trade policy, which also includes other measures that will affect key sectors in the country, from autos to chips.
With many of its companies contributing to global supply chains, South Korea relies heavily on international commerce to drive its economic growth.
The tariff shock came after South Korea’s worst-ever forest fires in March, further damaging slumping private consumption that had been weakening in the political turmoil sparked by Yoon’s brief imposition of martial law.
Response After Election
The finance ministry on March 30 proposed a supplementary budget of 10 trillion won ($6.97 billion) to help cope with the losses from the wildfires and to cushion the economy from the U.S. tariffs. The amount was far less than the 30 trillion won proposed by Lee in February.
Moon Chung-in, of Seoul’s Yonsei University, predicted that during the campaign, candidates from all parties will express support for the U.S. alliance and abstain from criticising Trump, but after the election will take more concrete steps to placate Trump, find alternate trade partners or impose other measures.
Lee, who narrowly lost to Yoon in the 2022 presidential race, faces his own legal troubles, and some industry figures see the liberal firebrand as less business-friendly than Yoon.
He has turned to some economic issues as a way to reach out to the business sector, including flexibility on working hour restrictions and reforming inheritance taxes.
DP lawmaker Kim Tae-nyeon said the party would use the campaign to pursue an economic policy that appeals to all sides.
“Yoon’s impeachment deprived South Korea of the capability to respond to the Trump administration’s ludicrous tariff policy and dealt a big blow to domestic demand,” he said.
Still, Lee is unpopular with a significant number of people and the conservatives could be competitive if they field a credible candidate, said Andrew Gilholm, director at the risk consultancy Control Risks Group.
“I think a lot of this now depends on how the conservatives position themselves… how much can they distance themselves from Yoon,” he said.
‘Highly Polarised’
In the short term, South Korea is likely to remain highly polarised, perhaps even more so than before, since Yoon’s impeachment has divided the country. However, the official PPP position has been to accept the impeachment decision, Hankuk University professor Mason Richey said.
“The DP also has a special responsibility to accept the impeachment verdict with magnanimity and not over-reach, but try to develop a unifying message,” he said.
Economic analysts generally welcomed the Constitutional Court’s ruling as it settled uncertainty, and market reaction was restrained.
“The biggest takeaway from today is that Korea now has hope that it will be able to do something with an elected leader in two months,” said Seo Eun-jong, BNP Paribas head of market research for Korea in Seoul.
($1 = 1,434.8500 won)
(With inputs from Reuters)
