South Korea is a presidential republic. Yoon Suk Yeol was impeached in December 2024 after declaring martial law. On February 19th 2026 a court sentenced him to life imprisonment for insurrection; his prime minister had received a 23-year sentence the previous month. The People Power Party (PPP) has split between "Yoon Again" defenders and a "Yoon Never Again" faction; the party's support has plummeted below 25%. Han Dong-hoon, the former PPP leader who broke with Yoon on the night of martial law, was expelled from the party. Local elections in June 2026 will provide the first electoral verdict.
Lee Jae-myung of the liberal Democratic Party won the snap presidential election on June 3rd 2025 with 49.4% of the vote and was inaugurated on June 4th. His party controls a majority in parliament. Presidents currently serve a single five-year term; Lee has called for constitutional amendments to allow two four-year terms and to make it harder to impose martial law.
South Korea hosted an APEC summit in October 2025. Donald Trump appeared at a forum for corporate executives alongside the APEC gathering but skipped the main meeting between APEC heads of state. During his visit, Trump and Lee Jae-myung formalised an agreement lowering tariffs on most South Korean imports from 25% to 15%, in exchange for $350bn in investments in America. Lee also received Trump's approval for South Korea to build nuclear-powered submarines, and the two countries are expected to renegotiate a nuclear agreement to allow South Korea to enrich or reprocess nuclear fuel. Lee announced an 8.2% defence-budget increase for 2026, the largest since 2008.
Relations at the border deteriorated under President Yoon Suk Yeol: South Korean activists wafted leaflets lambasting the North Korean regime over the frontier; North Korea sent back balloons filled with rubbish and excrement. Yoon then switched back on loudspeakers that had been blaring K-pop and news reports into the North—they had not been used since 2018. North Korea responded with its own loudspeakers broadcasting animal cries and spooky whistles. Lee Jae-myung, who became president in June 2025, silenced the loudspeakers as one of his first acts; the North turned off its noisemakers within days and the leafleting has mostly stopped. Lee also let the spy agency's radio broadcasts into North Korea go silent for the first time since 2010, as part of an effort to coax Kim Jong Un back to the negotiating table.
South Korea is a trade-oriented economy that exports heavily to America and imports 70% of its oil from the Middle East. Under the United States-Korea Free Trade Agreement, which came into force in 2012, the average tariff on imports from America is less than 1%.
Under Park Chung-hee's authoritarian rule, which ran from 1963 to 1979, the average South Korean's income went from that of a sub-Saharan African to that of an eastern European. The economy grew an average of 6.4% a year between 1970 and 2022. The Bank of Korea forecasts that even with productivity improvements, growth will slow to an average of 2.4% in the 2020s, 0.9% in the 2030s and 0.2% in the 2040s. In April 2025 the IMF cut the growth forecast for the year to 1%, down from 2% in January; the Bank of Korea later halved its forecast to 0.8%. Through the first 20 days of April 2025, exports shrank by 5% year-on-year; those to America fell by 14%.
Donald Trump imposed sectoral tariffs of 25% on steel, aluminium and automobiles, and announced "reciprocal" tariffs of 25% on all Korean goods (suspended for 90 days). His tariffs were based on the spurious claim that South Korea charges effective tariffs of 50% on American goods. South Korea subsequently concluded a deal with America setting its tariff rate at 15%, the same level as Japan, though the details remain unsettled. Weeks after the deal, on September 4th 2025, the Trump administration arrested 475 foreign workers at a Hyundai electric-car factory near Ellabell, Georgia—a $12.6bn investment that Brian Kemp, Georgia's governor, had personally negotiated in South Korea and that promised 8,500 new jobs. South Korea's foreign minister, Cho Hyun, flew to Washington on September 8th. Korean firms have long complained about lengthy visa waits that delay construction; those working illegally were subcontractors flown over to install and inspect production-line equipment. South Korea wants more legal visa options for Korean workers with specialised skills.
South Korea hosts American troops, whose presence it considers "absolutely critical" to deter North Korea. Trump has in the past threatened to withdraw some of them, but during Lee Jae-myung's visit to Washington in August 2025, Trump backed off such talk. In March 2026, however, America redeployed Patriot interceptor missiles and parts of a THAAD missile-defence system from South Korea to the Middle East for the Iran war. When the THAAD system was first sent to South Korea in 2017, it sparked fury in China, which encouraged consumers to boycott South Korean goods, causing massive economic losses. South Korea held firm despite the costs—and now bits of it were suddenly whisked away. South Korea has also managed to open discussions with America about allowing it to enrich and reprocess nuclear fuel. South Korean officials insist such capabilities are needed to strengthen their civil nuclear industry, but they would also make it much easier for the country to assemble nuclear weapons of its own. South Korea relies on America's nuclear umbrella; uncertainty over its continuation has created incentives for South Korea to consider acquiring its own nuclear deterrent. Elbridge Colby, Trump's undersecretary for defence policy, has argued that South Korea should take "primary, essentially overwhelming, responsibility for its own self-defence against North Korea" because America cannot fight North Korea and then be ready to fight China. He has said America should refrain from imposing sanctions on a nuclear-armed South Korea. Deterrence scholars warn that both North and South Korea already have pre-emptive, hair-trigger strategies, and that a nuclear newcomer on a hair-trigger facing a volatile neighbour would create special risks of escalation.
South Korea has significant shipbuilding expertise. America has sought South Korean help to revive its own dilapidated shipbuilding industry, though collaboration faces obstacles: American tariffs on steel raise costs, and America lacks the web of suppliers and skilled labour that shipbuilding requires. Lee Jae-myung visited Philadelphia during his August 2025 trip to highlight South Korea's support for the effort, which has been dubbed MASGA: Make American Shipbuilding Great Again.
South Korea's large companies are clustered in industries tied to major 21st-century trends. Samsung Electronics and SK Hynix, the KOSPI's two largest members, manufacture high-bandwidth memory chips critical to AI. Samsung Biologics, ranked third by value, is a biotech powerhouse. LG Energy Solution, ranked fourth, makes batteries. Hyundai and Kia make electric vehicles, and Hanwha Aerospace and HD Hyundai Heavy Industries manufacture weapons—all in the top ten by market capitalisation. Lotte is the country's most troubled chaebol.
In the 12 months to the end of February 2026, the KOSPI rose by 138%, leaving every other notable bourse in the dust. By late January 2026, less than eight months into Lee Jae-myung's tenure, his campaign pledge of "KOSPI 5,000" had been fulfilled. Within another month the index burst through 6,000. The rally was driven overwhelmingly by two firms: Samsung Electronics and SK Hynix, which together accounted for two-fifths of the KOSPI's market value (up from about a sixth in early 2025) and more than two-thirds of its one-year returns, propelled by soaring profits from memory chips critical to AI.
At the start of 2025 the KOSPI had traded at a price-to-earnings ratio of just ten, compared with 15 for Japan's TOPIX and 25 for the S&P 500—a persistent "Korea discount" attributed to the opacity of family-controlled chaebol conglomerates. Investors' enthusiasm over the past year reflected those very flaws turning into virtues: South Korean balance-sheets (heavy on assets) and products (low on obsolescence) suited the "HALO" trade, as companies raced to build AI infrastructure, defence budgets ballooned and the West and China decoupled in critical products.
In the two trading days after America and Israel attacked Iran in early March 2026, the KOSPI plunged by nearly a fifth, though it held above 5,000. Margin lending by retail investors had hit a record 34trn won ($23bn) in early March 2026, up from 18trn won the year before, amplifying both gains and losses.
In 2024 the government launched the "Value-Up" programme of corporate reform, modelled on a similar Japanese effort starting in the early 2010s. More than half of the KOSPI's 178 non-financial constituents trade at a discount to book value. The programme aims to prompt firms to disclose more, set performance targets, curb related-party transactions, unwind cross-shareholdings and appoint more independent directors. As of mid-2025, 120 KOSPI companies have published Value-Up disclosures. Managements faced 137 shareholder proposals in 2024, an unprecedented third from activist investors; a record 24% were adopted. Although 75% of the index's market capitalisation is in chaebol hands, the groups' current leaders are more open to change than the founding generation.
Since Lee Jae-myung became president in June 2025, parliament has twice amended the Commercial Act. Managers now owe a fiduciary duty to shareholders—previously their duty was to their firms alone. The amendments shift power towards minority investors and away from controlling families, mandating electronic shareholder meetings and tweaking voting procedures. Firms will probably also be obliged to retire "treasury shares", hoards of stock that dilute external shareholders and can be used to fend off activists. Hundreds of firms have already said they will nix such shares. In 2025 South Korean companies bought back a record $14bn-worth of shares. Some hold on to repurchased stock, making it easier to fend off activists; a law currently under debate would require repurchased shares to be cancelled. Listed firms have more than doubled share buy-backs since 2023. In 2025 the KOSPI 200 rose by 69% (in won) to a record high, though over half its members still trade below book value, against 31% in Japan's Nikkei 225 and 4% in the S&P 500. The president's "KOSPI 5,000" target was reached in late January 2026; the index burst through 6,000 in late February.
China is South Korea's largest trading partner. During the APEC summit in October 2025, Xi Jinping made his first official visit to South Korea in more than a decade. China had recently placed sanctions on South Korean firms helping America's shipbuilding industry, but temporarily suspended them following the Xi-Lee meeting and Xi's trade truce with Trump. For South Korea, China is not just a crucial economic partner but also key to restarting dialogue with North Korea.
The Yellow Sea is a gateway to both Beijing and Seoul. China's northern fleet has its headquarters on the Yellow Sea coast; on the Korean side sits Incheon, South Korea's second-largest deepwater port and the site of a famed battle during the Korean war in 1950. Camp Humphreys, America's largest overseas military base, is located inland only 15km from the Yellow Sea's shore. China and South Korea claim overlapping exclusive economic zones in the centre of the sea. In 2001 the two countries agreed to jointly manage fisheries in an area known as the Provisional Measures Zone (PMZ).
Since 2018 China has been testing the waters in and around the PMZ. At least 13 observation buoys have appeared. In 2018 Shenlan 1, a giant steel fish-farm structure, launched; the larger Shenlan 2 followed in 2024. A former oil rig was converted into a base to oversee the two farms, with a helipad and housing. Last summer China held military exercises with its largest aircraft-carrier in the PMZ and imposed no-sail zones. China insists the buoys are for research purposes and the Shenlan structures are simply aquaculture in China's "coastal waters". South Korea's parliament passed a resolution calling the structures a "violation of maritime rights".
Lee Jae-myung visited China in January 2026—the first trip by a South Korean leader since before the pandemic—and broached the subject of Yellow Sea tensions with Xi Jinping. At the end of the visit, Lee said China agreed to move one of the structures.
Some 63% of South Koreans now have favourable views of Japan, up from a nadir of 12% in 2020. The 60th anniversary of diplomatic ties between South Korea and Japan fell on June 22nd 2025. Under previous conservative president Yoon Suk Yeol, South Korea had tried to resolve a long-running spat about whether Japanese companies should pay additional compensation to wartime forced labourers. While 46% of Japanese reckon that historical issues have been resolved, only 17% of South Koreans do, according to a 2025 poll. The Dokdo/Takeshima islands, which South Korea controls and Japan claims, remain a flashpoint. Over 3m Japanese visited South Korea in 2024, while 8.8m Korean visitors came to Japan—equivalent to nearly one-fifth of South Korea's population. Polls find a majority of Japanese and South Koreans want their two countries to work more closely on defence.
South Korea is part of a small club of democratic nations with a GDP per person over $30,000 and a population over 50m. Its cultural exports—k-pop, k-drama, k-beauty, k-food—have made it a global soft power. Membership in fan communities connected to hallyu ("Korean wave" culture) grew from under 10m in 2012 to 225m in 2023, with groups of over 1m in countries as disparate as Italy, Chile and Jordan. "Into The New World" by Girls' Generation has become an anthem of democratic protest across East Asia, soundtracking anti-corruption protests in South Korea in 2016-17 and again during demonstrations against martial law in 2024, as well as pro-democracy rallies in Hong Kong in 2019-20 and in Thailand in 2020. In 2024 k-pop groups accounted for four of the ten most commercially successful albums in the world, according to IFPI, an international recording-industry body. In November 2024 Han Kang became the first woman from Asia to win the Nobel Prize in Literature. South Korea welcomed more than 3.5m foreign tourists between December 2024 and February 2025, around 20% more than in the same period a year earlier, despite the political turmoil following Yoon Suk Yeol's martial-law declaration.
South Korea exported $1.2bn-worth of ramyeon (spicy instant noodles) in 2024, an increase of 31% on 2023. Ramyeon was developed in the 1960s and promoted by the government as an easy, affordable and hearty meal; it was supposedly Park Chung-hee, the military dictator at the time, who suggested adding chilli powder to appeal to Korean palates. Samyang Foods, which makes the popular Buldak variety, generates three-quarters of its revenue from exports.
South Korean arms exports averaged $13bn annually between 2022 and 2024, up from an average of $3bn between 2011 and 2021, putting the country among the world's top ten arms exporters. Following Russia's invasion of Ukraine in 2022, South Korea was an exception to the global shortage of munitions: the need to respond to continuing threats from North Korea kept its production capacity high. Seven giant firms work with the government to land orders and co-ordinate research and development. South Korea is tied with France as the second-largest exporter of arms to European NATO members, behind America, and has more orders from around the world than America does for tanks and artillery.
The largest deal is the one South Korea signed with Poland in 2022, now worth $22bn, for 180 K2 Black Panther tanks, 672 howitzers, 48 FA-50 fighters and 288 K239 rocket launchers, partly built in Poland. In 2024 South Korea sold $3.2bn-worth of Cheongung-II surface-to-air missile systems to Saudi Arabia, warships to Peru worth $460m and $1bn of self-propelled howitzers to Romania. South Korea may win a $17bn contract to build 12 KSS-III submarines for Canada, taking advantage of the lack of shipbuilding capacity in America.
South Korea's most ambitious programme is the KF-21 fighter, expected to enter service in late 2026. Currently a 4.5-generation aircraft, its next update is hoped to make it a full fifth-generation stealth fighter with indigenously manufactured engines. It has won interest in eastern Europe, the Gulf and South Asia. Not even Japan or Israel have managed to build a competitive fifth-generation fighter. Arms exports hit $17.3bn in 2022 but fell to $9.5bn in 2024; the country expects around $23bn in 2025. Lee Chung-min of the Carnegie Endowment for International Peace argues South Korea must raise the share of R&D in the defence budget from 17-18% to 20-23% to remain competitive. Production of Korean-made fighter jets on order from Poland has stalled because America has yet to authorise the export of some components.
Nearly 40% of South Koreans aged above 65 remain at work, the highest rate in the OECD. The average public pension replaces only about a third of workers' pre-retirement income, so nearly 40% of South Koreans over 65 make less than half the median income—also the highest rate in the OECD. The pension system failed to keep pace with the country's rapid development after the Korean war, leaving generations with inadequate support. In 2013 the statutory retirement age was raised from 59 to 60. The national government finances over 1m part-time jobs for seniors as a quasi-welfare policy. The Seoul 50Plus Foundation, an arm of the capital's municipal government, helps those on the cusp of retirement from their first career plan for a second one.
Forecasts suggest that South Korea's GDP will start to shrink in the late 2040s because of its collapsing birth rate. Michael Clemens of George Mason University points out that if South Korea brought its temporary-migrant population from 3% to 15% of the total (the same share as Australia's), it could offset most of the slump.
South Korea has spent $270bn over the past 20 years on pro-natalist policies: subsidising taxis for pregnant women, providing free IVF and, in some towns, giving new mothers free housing. In 2025 it began granting couples a cash payment of close to 30m won ($20,000) over eight years for each child. These policies have had little effect.
South Korea has had a total fertility rate of less than one for seven years. In 2024 it rose slightly for the first time in nearly a decade but remained the lowest in the world at 0.72–0.75; the rate plunged from 1.2 over the past decade. If sustained, the population will shrink by more than half in a single lifetime. It is projected to fall to 47m by 2050 and 37m by 2070. See global population decline.
South Korea once had one of the most extreme son preferences in the world: in 1990 almost 116 boys were born for every 100 girls. Among third-born children the ratio exceeded 200 to 100; among fourth-born it approached 250 to 100. Today the sex ratio at birth is near even. The share of women who felt it "necessary" to have a son plunged from 48% in 1985 to 6% in 2003. Nearly half of women now want daughters. Girls account for a clear majority of adoptions.
South Korea ranks second-last out of 29 rich countries on The Economist's glass-ceiling index of equality in the workplace. The political gulf between young South Korean men and women is among the widest in the rich world. Around half of young Korean men think they are discriminated against (other than having to do military service, they are not); some 60% complain that feminism demeans them. They also tend to do little housework. See singlehood. A study by Youm Yoosik of Yonsei University finds that the share of Korean adults who have not had sex in the past year has trebled since 2001, to 36%. Celibate men are nearly all involuntarily so; celibate women are choosing to shun men.
Lee Jae-myung calls Seoul's white-hot property market "the fountainhead of all problems" for the country. In February 2026 he sold his own flat in Seoul at a below-market price to make a point that homes are for living in, not investment. In 2024 the greater Seoul area's house-price-to-income ratio rose to 8.7; the price of flats rose by 9% that year, the fastest increase in nearly two decades.
Over half the country's population lives in the greater Seoul area, and construction of new housing has slowed to a crawl. Property is a favoured investment: homeowners who buy multiple properties and rent them out provide over 86% of the private rental market in Seoul. Many use a system known as jeonse, where instead of monthly rent, tenants pay a large deposit—averaging 590m won (about $400,000) in Seoul in recent years—that landlords invest until the lease ends. These deposits are out of reach for many, and stories of landlords failing to return them have spooked tenants; paying monthly (wolse) now accounts for around 60% of rental transactions, up by over 20 percentage points from five years ago. Nearly 40% of Seoul's households are single-person.
Household debt, much of it mortgage-related, is 90% of GDP, compared with 60-70% in America and Japan. Jeonse sums tenants borrow to pay for deposits make up 11% of household debt. Landlords often use the cash to buy other properties, further inflating prices.
Since taking office in June 2025, Lee has tightened mortgage restrictions for homebuyers and required newly bought homes in Seoul to be owner-occupied for two years. In swanky Seoul, mortgages cannot exceed 40% of the home's value, down from an earlier limit of 50% (compared with 70% in less frothy cities). On April 1st 2026 many caps were extended to mortgages provided by non-bank institutions such as insurers and lending clubs. A capital-gains tax exemption on property sales for owners of more than one home was set to expire in May 2026. For the first time in a decade of polling, over half of South Koreans approve of the president's housing policies. Prices in upmarket districts such as Gangnam have levelled off. In about 15 years, baby-boomers living in Seoul will approach the country's average life expectancy; their homes will eventually free up supply for smaller generations born since the drastic decline in birth rates.
In November 2025 Lee Jae-myung pledged to "construct the highway for the AI era", just as Park Chung-hee "paved the highway for industrialisation" in 1973. Lee's plan involves spending $530bn over two decades on the chip industry—nearly equivalent to a year's worth of all government spending. A $50bn government fund invests in chip companies' shares and is designed to mobilise another $50bn in private capital. A law passed in January 2026 allows the government to channel cash directly to firms via a new off-budget vehicle.
The centrepiece is the world's largest semiconductor "mega-cluster" in Yongin City, 40km south of Seoul. Samsung Electronics and SK Hynix have between them pledged $700bn to the project by 2047—a third more than their combined global capital spending over the past decade. The goal is to move beyond memory chips and nurture a broader semiconductor supply chain. As part of its contribution, SK Hynix is building a "mini-fab" where smaller tool and materials firms can test their products. Lee has also announced a semiconductor "belt" spanning three southern cities to distribute the resulting economic gains. Critics argue that locating high-tech facilities far from the talent hubs and supplier networks around Seoul, where 80% of Korean chips are made, makes no sense.
The second plank of Lee's strategy is to encourage "productive finance" by diverting capital from the housing market to industry. Regulators have reduced the risk weights that banks must attach to venture-capital investments, making such bets more attractive, and are considering lowering them for corporate loans. Loan growth to small and medium-sized firms at the country's four biggest lenders slowed by half in 2025.
In 2025 the government cut inheritance tax as part of a broader effort to boost the economy. The budget deficit has exceeded the government's 3% target (on its preferred measure, which excludes surpluses from big state-pension funds). The government presented a supplemental budget at the end of March 2026, full of support measures including handouts for low-income families, equivalent to nearly 1% of GDP.
On August 27th 2025 South Korea passed a ban on smartphones in classrooms. Governments from China to Finland, as well as dozens of American states, have introduced bans and restrictions of varying severity. A randomised controlled trial in India following 17,000 higher-education students for three years found that requiring phones to be left outside classrooms led to a small but measurable improvement in grades; the weakest students benefited most.
South Korea built its entire economic strategy on a foundation of quality standards. To compete abroad in the 1960s, the government built high-quality national infrastructure, encouraged the private sector to develop voluntary standards and then ramped up participation in international organisations like the ISO and the International Electrotechnical Commission. See non-tariff trade barriers.
Google Maps has been hamstrung in South Korea by restrictions on the export of high-precision map data. Nearly two decades after the service launched, even basic walking or driving directions in South Korea are unavailable. The government has long denied Google's requests for 1:5,000-scale cartographic data, citing national-security concerns—given North Korea, South Korea takes issue with publishing the co-ordinates and close-up imagery of sensitive sites such as military facilities. The restrictions have helped home-grown tech firms, such as Naver, remain the country's dominant digital-map providers. Naver accounted for around 70% of South Korea's search traffic in 2025, compared with Google's 30%—versus Google's 90% share globally. As part of an investment deal agreed with America in exchange for tariff reduction, South Korea pledged to facilitate "cross-border transfer of data, including for location" for American companies. Donald Trump threatened to re-raise tariffs for not ratifying the deal fast enough. On February 27th 2026 South Korea conditionally approved Google's export request, allowing overseas servers to process data needed for navigation services.
It would be nice if the Food and Drug Administration stopped issuing warnings about toxic substances and just gave me the names of one or two things still safe to eat.