On Thursday, July 3, South Korean President Lee Jae-myung pledged to adopt an assertive fiscal approach to revive the country's weakening economy following a period of martial law, and to address the growing pressures from U.S. trade policies and North Korea. Elected on June 3 in a snap vote, Lee emphasized that restoring public trust and improving livelihoods, severely shaken by what he described as a "national crisis," were his administration’s top priorities. The crisis had significantly impacted Asia’s fourth-largest economy.

"In times like these, a proactive and bold fiscal strategy is more crucial than ever," Lee stated during his opening remarks at a press briefing marking 30 days in office. He reiterated his commitment to an expansionary fiscal policy. The crisis stemmed from a controversial martial law declaration in December by former President Yoon Suk-yeol, which stunned the country and triggered an unprecedented constitutional upheaval, threatening the democratic progress South Korea has made since the 1980s.

To stimulate weak domestic consumption, Lee’s government has proposed an additional spending package worth US$14.7 billion. The proposal awaits approval from a legislature dominated by his Democratic Party. Lee also touched on trade negotiations with the United States, calling for a “mutually beneficial and sustainable” outcome. South Korea is bracing for potential U.S. tariffs that could severely affect its export-driven economy, particularly in key sectors like semiconductors, automobiles, and steel.

Negotiations have been tough, Lee admitted, and it remains uncertain whether a deal can be reached before the U.S. deadline of July 8, when steep reciprocal tariffs are expected to come into effect. A senior trade official noted that while South Korea already levies near-zero tariffs under its free trade pact with the U.S., Washington raised concerns about non-tariff trade practices during last month’s talks.

A former human rights lawyer and liberal politician, Lee affirmed that maintaining strong ties with the United States remains central to his foreign policy. However, he stressed the importance of a pragmatic approach to improving diplomatic relations with China and Russia as well. On North Korea, Lee highlighted that peace and dialogue were essential not only for security but also for sustained economic growth. He acknowledged that rising tensions with Pyongyang have already taken a toll on South Korea’s economy, despite its superior military capabilities, backed by a defense budget larger than North Korea’s entire GDP.

"Even during wartime, diplomacy and dialogue must continue. Cutting off communication completely is sheer folly," Lee said in response to questions about inter-Korean relations. The Korean War technically never ended, as only an armistice was signed in 1953. Lee noted North Korea responded swiftly after he halted the use of propaganda loudspeakers along the border, and hinted at further steps to reduce military tensions. Under former President Yoon’s more hardline stance, a 2018 military agreement with the North was scrapped, significantly heightening regional tensions.