South Korea: The Necessity of Strategic Awareness Amid Seoul's Prevalent Challenges

Key Takeaways:

• Caught in a precarious balancing act between the US and China, South Korea’s traditional policy of “strategic ambiguity” is poised to become increasingly strained as relations deteriorate between the world’s two largest economies.

  
  

• Tensions with Pyongyang remain dangerously high and have continued to escalate in recent years. North Korea’s nuclear weapons programme continues to advance in sophistication and the country’s growing alignment with Russia is disconcerting for security on the peninsula.

  
  

• South Korea has endured a period of domestic political chaos following former President Yoon Suk Yeol’s failed declaration of martial law in December 2024. At a time of intense division and excessive partisanship, the upcoming election could provide a flashpoint for further disruptions and protests.

  
  

• The multitude of challenges facing South Korea underscore the importance of businesses and individuals operating within the country seeking tailored geopolitical consultancy solutions.

  
  

• Trapped amid an escalating Sino-American great power competition, alongside an ongoing military standoff against its nuclear-armed northern neighbour, domestic political upheaval, and an escalating trade war—the challenges facing South Korea are widespread. Although Seoul’s ability to adapt to its difficult strategic situation has long been impressive, mounting issues suggest the country’s manoeuvring space is narrowing. It is imperative that businesses and individuals take note of the developing situation and adopt tailored strategies to insulate themselves from the growing risks.

Caught Between Two Great Powers:

For Seoul, sitting at the intersection of two competing spheres of influence demands adept diplomatic balancing. Notwithstanding the government’s impressive historical record of successfully navigating complicated strategic challenges, escalating tensions between Washington and Beijing pose an unprecedented challenge.

As a strategically located middle power which has traditionally walked the middle path by pursuing a policy of “strategic ambiguity”, it is unsurprising that the pressure is increasing on Seoul to choose its allegiances. With their shared history of military, economic, and diplomatic cooperation, Washington possesses leverage to draw South Korea further into its orbit. However, by retaining significant economic influence over South Korea and diplomatic sway over its arch-nemesis in Pyongyang, Beijing threatens to make life difficult if Seoul strays too far from neutrality.

Washington has endeavoured to contain Chinese expansionism in the Indo-Pacific theatre through diplomacy, strengthening alliances, and expanding its military presence. However, China has moved to disrupt the United States’ (US) efforts through a range of countermeasures and provocations. These include constructing and militarising artificial islands in the South China Sea, using multilateral platforms such as the Shanghai Cooperation Organisation and BRICS to shift diplomatic alignments, pursuing hybrid warfare tactics such as undersea cable sabotage, and economic coercion.

Although Seoul has broadly aligned with the US strategy of countering China’s rise, with such major deterrents in place, even President Yoon’s administration, with its greater emphasis on US alignment, remained cautious. For instance, despite normalising relations with Japan at the August 2023 summit at Camp David, Seoul opted not to pursue the more anti-China AUKUS membership, which would have likely provoked backlash from Beijing.

With the US and China engaged in a seemingly never-ending cycle of tit-for-tat tariff measures aimed at decoupling the two economies, the escalating trade war is further exacerbating matters. In 2024, South Korea’s exports to China were valued at $133 billion, making China the country’s greatest foreign market, closely followed by the US at $128 billion.

In addition to the numerous economic risks of a trade war involving your two largest customers, both sides have demonstrated their preparedness to target South Korea when doing so is considered necessary. For instance, in July 2016, after South Korea angered China by announcing the decision to deploy the US Terminal High Altitude Area Defense (THAAD) missile defence system, Beijing blocked access for South Korean goods and services in sectors including entertainment, consumer products, and tourism. More recently, in April 2025, following US President Donald Trump’s “Liberation Day” tariff announcement, South Korea was hit with 25% tariffs on its exports to the US.

Escalating Sino-American competition in the technological domain is also becoming increasingly noteworthy for South Korea. With the growing importance of technology across sectors, it was no coincidence that the US has targeted Beijing’s access to US advanced semiconductors, telecommunications equipment, artificial intelligence (AI) technology, and dual-use technology by imposing sanctions. With the recent emergence of DeepSeek demonstrating China’s competitiveness in the AI race, tensions are set to continue to escalate concerning technology.

As a global leader in semiconductors and 5G, the US views South Korea’s technology sector as critical in limiting China’s progression. Despite pressure from Washington to introduce export controls, South Korea’s reliance on China for manufacturing and sales has discouraged Seoul from taking such action. Highlighting the need for tailored consulting services, the matter remains a potential flashpoint for South Korean businesses within the sector that could inadvertently become embroiled.

From suppressing Buddhism in Tibet and quashing democracy in Hong Kong, to persecuting Uighur Muslims in Xinjiang, China’s human rights violations have also introduced a diplomatic angle to the Sino-American clash. Despite sharing a greater ideological footing with the US, the potential consequences of diplomatic fallout with Beijing have resulted in Seoul largely avoiding direct condemnation. This was demonstrated by the government’s muted response during Hong Kong’s pro-democracy movement and Beijing’s controversial imposition of the National Security Law in June 2020 to effectively extinguish democracy in Hong Kong.

Navigating Uncertainty Under the New Trump Administration:

The Biden Administration considered minilateral alliances such as the US-Japan-South Korea trilateral pact to be a strategically useful means of checking Chinese influence. Contrarily, the Trump Administration views such alliances as “dependencies to be exploited by extracting maximum benefits to suit his America First agenda”.

With approximately 28,500 US military personnel currently stationed across several military bases in South Korea as a deterrence against North Korea, Seoul is committed to US security alignment. However, Trump has repeated falsities about the financial agreements between the two countries for this arrangement and his role in brokering a new deal. In a February 2023 post on his social media site Truth Social, Trump claimed “I had a deal for full payment to us, $Billions, and Biden gave it away. Such a shame!!!”. In fact, under Biden, a six-year agreement was reached in 2021, which saw South Korea agree to pay 13.9% more for the next six years.

Considering the rhetoric used by Trump, coupled with the US’ significant trade deficit with South Korea of $66 billion in 2024, it came as little surprise that South Korea was targeted by the “Liberation Day” tariff announcement. Despite Acting President Han Duck-soo vowing an “all-out” response, with Seoul’s military interests tied to the US contending with domestic pressure to retaliate against the measures, the situation has created a difficult balancing act for the government. Although there are numerous benefits to conducting business in South Korea, navigating the fast-evolving landscape necessitates tailored strategic geopolitical advice and an ongoing awareness of situations in real time.

The North Korean Problem:

The border between South and North Korea ranks among the most tense and volatile in the world. Although the bloody fighting that occurred during the 1950-1953 Korean War was stopped by an Armistice Agreement, with no formal peace treaty signed, it would be better to think of the conflict as on pause rather than resolved. While the confrontation has never been straightforward, things have become more complicated in recent years. North Korea’s advancing nuclear weapons programme demonstrates increasingly formidable potential. Pyongyang has been perfecting the design of its thermonuclear warheads for a range of delivery systems, including short-range ballistic missiles (SRBM) and intercontinental ballistic missiles (ICBM). Additionally, in September 2022, North Korea introduced a law that expanded the conditions under which they could be used, including the option of pre-emptive strikes if the regime perceives a threat.

Although Pyongyang has a history of using fearmongering as a strategic tool, this policy shift may suggest an increasing preparedness to resort to nuclear weapons.

In recent months, Pyongyang has made strides to reduce its isolation by deepening ties with select partners. In September 2022, reports emerged that North Korea was sending armaments, including artillery shells and ballistic missiles, to support Moscow’s war in Ukraine. In Autumn 2024, this was expanded by Pyongyang, which sanctioned the deployment of troops. According to estimates from Ukrainian, US, and South Korean sources, North Korea has sent at least 11,000 soldiers, out of which 1,000 have been killed. Despite suffering heavy casualties, in February 2025, South Korea’s intelligence agency said that North Korea had sent an additional 3,000 troops, many of whom were deployed to the front line in Kursk. According to South Korean intelligence officials, North Korea has received food, oil, money, and air defence missiles from Russia as payment.

It is entirely plausible that North Korea will seek greater economic assistance and military technology in the future. Improving bilateral relations risks opening the door for North Korea to join the Russian-led Collective Security Organisation and potentially other international organisations, such as the Shanghai Cooperation Organisation and BRICS. This would elevate North Korea’s status within the anti-Western world order, potentially introducing a situation in which North Korea could call upon both Beijing and Moscow to protect its interests. For South Korean businesses, investing in the development of an ongoing awareness of the multifaceted threat posed by North Korea is imperative.

Trouble at Home:

When South Korean President Yoon Suk Yeol declared martial law late in the evening on 03 December 2024, he set in motion a sequence of events that is still unravelling over four months later. While the world was shocked by Yoon’s move, his prior political track record was controversial. Yoon was highly unpopular domestically, having overseen growing inequality and inflation, faced accusations of increasing censorship, and vetoed bills aimed at supporting farmers, nurses, and investigating his wife’s questionable financial dealings. As of the second week of December 2024, only 11% of respondents approved of Yoon’s performance in office, while 85% disapproved.

After becoming a lame duck president in April 2024, when the main opposition Democratic Party secured a landslide majority, Yoon became increasingly desperate. Against this backdrop, Yoon’s claims that martial law was necessary to protect the country from “North Korea’s communist forces” and “eliminate anti-state elements” failed to convince the public. Just hours after making the announcement, Yoon reversed course after lawmakers forced their way into the National Assembly to vote the measure down as thousands of protestors gathered outside. 

With South Korea’s dark history of military rule, Yoon’s decision ultimately brought about his political demise, albeit after months of political chaos. the ensuing weeks saw multiple impeachment attempts, the impeachment and reinstatement of acting President Han Duck-soo, mass protests, and even an embarrassing failure by law enforcement to arrest Yoon at the first attempt. Although Yoon’s fate was finally sealed on 04 April 2025 when the Constitutional Court delivered its unanimous decision, with his criminal trial and a snap election to be held by 03 June, stability in the near future appears unlikely.

Forecast:

• With an election on the near horizon, the country’s domestic political upheaval is entering a new phase. Yoon’s conspiracy theories have taken root and far-right extremism is on the rise at a time of intense division, excessive partisanship, mass protests, and populism. With the country’s history of protests and demonstrations, such incidents are highly likely in the coming weeks and months. Businesses in South Korea are advised to safeguard their operations by ensuring they acquire the means to anticipate developing threats.

  
  

• While the election may bring domestic political clarity, the Sino-American power struggle and the North Korean threat are deeply entrenched issues. South Korean companies must be proactive in insulating themselves from the growing uncertainty, regardless of whether there is an improvement in the domestic political situation.

  
  

• The volatility brought by Donald Trump’s re-election has added further volatility to an already virulent global threat landscape. Understanding the business implications of Trump’s return and the escalating global trade war necessitates tailored risk consultancy solutions.