President's arrest shows South Korea in peril as Trump returns

South Korean investigators managed to arrest impeached President Yoon Suk Yeol on Wednesday while avoiding a violent clash in the middle of Seoul. But the nation’s troubles are far from over.

North Korean leader Kim Jong Un is sending more and more troops to fight Ukraine and testing new missiles at home after striking an alliance with Russia. South Korea’s economy is slowing just as the nation suffered its worst-ever aviation disaster. And Donald Trump is threatening new tariffs while demanding more money for U.S. troops who have helped defend the nation since the 1950s.

With Yoon’s impeachment trial set to drag on for several months — a process separate from the criminal insurrection probe that led to the unprecedented arrest of a sitting president on Wednesday — the mood in Seoul is grim. Still reeling from Yoon’s shock move to declare martial law last month, bureaucrats around the capital are doing their best to keep the economy moving and prepare for Trump without any clear political direction.

The most immediate concern is on the economy. Officials in Seoul have closely watched Trump’s threats to impose tariffs and use the military to gain control of Greenland and the Panama Canal, saying it shows he’s willing to take more extreme demands in his second term. They are busily preparing for a range of scenarios if Trump targets the nation, which has one of the highest trade surpluses with the U.S., including coordinating with South Korean chipmakers and auto firms planning big investments in America.

Over the long term, a potentially bigger threat is how Trump handles North Korea. The fear in Seoul is that the U.S. president again seeks to directly negotiate with Kim on a legacy-defining deal that could undermine South Korea’s security interests. Any cracks in the alliance or weakening of extended deterrence against North Korea’s nuclear threats risks spooking investors and boosting public support in South Korea for atomic weapons.

Wi Sung-lac, a member of the opposition Democratic Party who was once South Korea’s top nuclear negotiator with North Korea, called Yoon’s reluctance to resign and pave the way for a new administration “unpatriotic” in the face of security and economic challenges.

“If Trump administration applies across-the-board tariffs, that will be a big hit for our firms, the economy and employment when Korean economy is going slow,” Wi said in an interview in his office in the parliamentary complex, where lawmakers quickly gathered to overturn Yoon’s martial law order last month. “We need to give a signal to the market that the Korean government is stabilized, and soon it will be normalized.”

So far, investors have largely shrugged off the concerns. While the won has slumped in line with other Asian currencies, the benchmark Kospi index has regained its losses after Yoon’s martial law declaration and is up 4.1% so far this year.

Yet economic data released ahead of Yoon’s arrest showed the risks: South Korea’s unemployment rate rose to the highest level in more than three years, reflecting a broader drop in consumer and business sentiment. The Bank of Korea is expected to lower interest rates on Thursday for the third time in a row, after the Finance Ministry earlier this month cut its growth forecast for this year to 1.8%.

What’s more, South Korean companies are among those sitting in the middle of U.S.-China tensions. Bloomberg reported on Wednesday that the Biden administration plans to unveil more regulations in its final days aimed at pressuring chipmakers including Seoul-based Samsung Electronics Co. from selling advanced semiconductors to China. A poll this month by the European Council on Foreign Relations found that only 17% of South Koreans saw Trump’s win as good for world peace, the lowest among 24 nations surveyed.

As of now, South Korea will be represented by Acting President Choi Sang-mok, also Yoon’s finance minister. The Constitutional Court is likely to rule in March on whether Yoon can stay in office, Citigroup Inc. economists estimate. If he’s out, an election will be held within 60 days, giving South Korea a new leader sometime in May. If Yoon stays, he will likely face more protests, a hostile legislature and the ongoing criminal proceedings over insurrection.

In the meantime, bureaucrats are hoping that Trump goes easy on South Korea. While the Group of 20 nation has a competent bureaucracy that will keep the government functioning, personal relationships are key to dealing with the next U.S. president. Before his declaration of martial law, Yoon began working on his golf game.

Yoon’s conservative supporters may also try to appeal to Trump by painting the South Korea leader as a victim. Pro-Yoon protesters have gathered daily in frigid temperatures to support him, waving American flags and holding signs that say “Stop the Steal” to draw parallels to Trump’s unfounded claims that he was the rightful winner of the 2020 U.S. election.

“We can’t turn our free Korea into communism, and everything the Democratic Party is doing now is trying to hand over the country to China,” Han Ah-rhem, a 44-year-old supporter of Yoon, said on Wednesday outside his residence in one typical comment.

In surrendering to authorities, Yoon said he only gave up to avoid bloodshed and vowed to fight, calling the investigation “illegal and invalid.” Once in custody, he refused to answer questions about the martial law declaration. Investigators now may ask the court for another warrant that will enable them to detain him for 20 days.

The opposition Democratic Party is looking to build ties with officials close to Trump to counter perceptions that it will push for a softer policy toward China and North Korea. Lee Jae-myung, the favorite to become the next president if Yoon leaves office, is more pragmatic than Moon Jae-in, the former Democratic leader who dealt with Trump during the U.S. leader’s first term, according to Wi, a diplomat for some three decades.

“Our position is clear: The U.S. alliance is the main pillar of our foreign policy,” Wi said.

During Trump’s first term, South Korea under Moon became the first nation to sign a renegotiated trade deal with Trump, showing the nation can move quickly if necessary.

“It is certainly unfortunate timing and will impede the ROK from pursuing an early, pro-active strategic approach to the Trump administration,” said Jenny Town, a senior fellow at the Stimson Center, of South Korea’s political mess. “A swift political recovery and resolution to the impeachment — especially the impeachment part — can help reinforce South Korea’s democratic resilience and ability to get back to business.”

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With assistance from Sohee Kim.