South Korea’s newly elected President Lee Jae-myung may slow trade negotiations with the United States (US).

His administration is currently reviewing strategies and observing developments in similar discussions involving Japan and China, according to sources from the ruling Democratic Party.

Lee took office on June 3 without a typical transition period. Trade negotiations with the US have been highlighted by Lee as a key priority.

South Korea’s economy, which heavily relies on exports in sectors such as semiconductors, automobiles, and shipbuilding, is projected to grow by only 0.8% this year, marking the weakest growth since 2020.

🔗 Source: Reuters

🧠 Food for thought

1️⃣ South Korea’s export-led economy faces pivotal moment amid cyclical pressure

President Lee’s trade negotiations with the US come at a critical juncture in South Korea’s economic history, where the country’s fundamental growth model is under pressure.

South Korea’s economy was transformed through export-focused industrialization starting in 1962, which drove annual trade growth of 40.8% between 1962-1970 as exports jumped from $500 million to $2.8 billion 1.

This export dependence remains structural today, with the nation now facing its weakest projected growth (0.8%) since 2020, while export growth is expected to plummet from 6.9% in 2024 to just 1.8% in 2025 2.

The upcoming negotiations reflect a recurring historical pattern where South Korea must adapt its trade strategy during global economic shifts, similar to adjustments made after the 1997 Asian Financial Crisis that forced substantial economic reforms and IMF intervention 1.

Lee’s emphasis that “the most pressing matter is trade negotiations” acknowledges that Korea’s export-oriented sectors, such as semiconductors, automobiles, and shipbuilding, remain the foundation of national prosperity despite decades of economic evolution.

2️⃣ Previous US-Korea trade agreements show complex outcomes beyond tariffs

The original KORUS agreement implemented in 2012 produced mixed results that offer valuable context for the current negotiations.

Despite reducing barriers, the US trade deficit with South Korea increased by 75% from $13.2 billion in 2011 to $23.1 billion by 2017, creating political pressure in the US for revisions 3.

However, the same agreement created benefits for American exporters, with increased exports for over 40% of goods already being traded and approximately 1,000 new products being exported to South Korea after implementation 4.