On April 4, 2025, South Korea’s Constitutional Court unanimously upheld (8–0) impeachment of President Yoon Suk Yeol, officially removing him from office. The court found Yoon’s December 2024 declaration of martial law to be a grave violation of constitutional authority and democratic principles. In accordance with the ruling, a presidential election is scheduled for June 3, with Prime Minister Han Duck-soo serving as acting president in the interim. The elected successor will assume office on June 4, immediately beginning a full five-year term.
Political Outlook and Presidential Race
Democratic Party leader Lee Jae-myung is currently the leading presidential candidate, with polling indicating double-digit leads over contenders from the conservative People Power Party (PPP). If elected, Lee could become one of the most powerful presidents in recent Korean history. The Democratic Party currently holds 170 of 300 National Assembly seats, and when including pro-Democratic minor parties and independents, that number approaches 189—providing him with a strong mandate to push forward his policy agenda. However, if a PPP candidate wins—a scenario seen as unlikely—it would likely result in continued legislative gridlock, mirroring the latter part of the Yoon administration.
Although Lee has not released a detailed policy platform, his presidential campaign has outlined the “K-Initiative”—a vision focused on pragmatism, efficiency and national interest. Based on public statements and interviews, key policy directions are expected to include:
- Economy: Lee aims to tackle economic polarization and slow growth by boosting domestic demand and supporting strategic industries. With domestic consumption below the Organisation for Economic Co-operation and Development (OECD) average, his administration is expected to focus on stimulating internal markets to drive growth.
- Foreign Policy: Lee advocates pragmatic diplomacy—maintaining strong ties with the United States and Japan while seeking to improve strained relations with China and Russia, based on national interest and regional balance.
- Industry: Lee plans to strengthen the semiconductor sector and invest KRW 100 trillion (~USD 71.4 billion) in artificial intelligence (AI), positioning both as core pillars of Korea’s industrial strategy.
U.S. Tariffs and Trade Negotiations
South Korea has been named a top target in upcoming trade negotiations by the Trump administration, alongside Japan, the UK, Australia and India. Sensitive issues, such as shipbuilding cooperation, the Alaska LNG project and bilateral trade balance, have already been discussed in recent communications between Acting President Han and President Trump. A high-level Korean delegation, led by Minister of Trade, Industry and Energy Ahn Duk-geun, is being assembled. The government is pursuing a two-pronged approach: increasing U.S. imports (e.g., gas, crude oil, agricultural goods) and encouraging local production of Korean exports in the United States.
Economic Impact
The impeachment marked a turning point for South Korea’s economy—easing political uncertainty but exposing deeper structural and external risks. To steady markets, the Financial Services Commission held an emergency meeting, urging banks to extend credit and liquidity to export-reliant firms hit by new U.S. tariffs. Retail and consumer sectors remain under strain: discount retail store chain Homeplus entered rehabilitation, luxury goods platform Balaan filed for court receivership and Hyundai Duty Free announced branch closures—highlighting weak consumer confidence. The Korean won briefly dipped but recovered to 1,434.1 KRW/USD. More broadly, rising U.S. trade tensions threaten key industries like semiconductors and autos, prompting the government to weigh emergency support to protect competitiveness. The recent impeachment of President Yoon Suk Yeol has introduced significant shifts across various sectors of South Korea’s economy. While the political uncertainty has been addressed, the business landscape continues to grapple with both domestic and international challenges.
Innovation, Industrial Policy and Government Stimulus
AI is expected to play a central role in South Korea’s next wave of industrial development. Under the Yoon administration, over KRW 15 trillion had been earmarked for initiatives like the National AI Computing Center, but the future of these projects is now in flux due to leadership transition. Implementation has slowed, and private-sector enthusiasm has cooled.
However, the passage of the AI Basic Act in December 2024—making South Korea only the second country after the EU to enact a comprehensive legal framework for AI—provides a foundation for long-term growth. With Lee Jae-myung pledging KRW 100 trillion (~USD 71.4 billion) in AI investment and emphasizing public-private collaboration, industry leaders are cautiously optimistic about a renewed push for innovation and competitiveness.
In a sign of continuity across administrations, the current government announced an expanded supplementary budget on April 15—rising from KRW 10 trillion to KRW 12 trillion (~USD 8.57 billion). This funding targets AI, semiconductors, green transition and support for small and medium enterprises and vulnerable populations. The move underscores a broader shift toward pro-business and pro-growth policies, regardless of who takes office in June, and positions technology and strategic industry development at the center of Korea’s economic recovery.
Challenges Ahead
President Yoon’s impeachment marks a historic turning point for South Korea, politically and economically. As the nation prepares for a new administration, businesses should expect policy recalibrations focused on domestic growth, strategic industry support and trade diplomacy. While uncertainties remain, the rapid institutional response and democratic resilience have provided a degree of stability.
Companies operating in South Korea should closely monitor evolving political developments, assess sector-specific risks and opportunities and prepare adaptive strategies for the post-election landscape.
APCO intern Judy Lee co-authored this piece.
