Lee Jae-Myung’s Plan to Reboot South Korea Faces Tests on Trade, AI, and North Korea

South Korea’s President Lee Jae-Myung laid out a comprehensive plan to reboot the economy, stabilize the domestic political landscape, and raise Seoul’s profile on the world stage, signaling a deliberate pivot after a chaotic start that stemmed, in large part, from the previous administration’s martial-law episode. On his first days in office, Lee’s staff arrived at the blue‑printed vision for government only to find rooms strewn with trash and desks missing computers, a reminder of the disruptions that followed the transition. “It was a very busy and chaotic period,” Lee said in his only Western media interview since taking office. “I thought that we had done much preparation in advance, but it was not sufficient.” The turmoil under former President Yoon Suk-yeol’s December declaration of martial law led to six months of political paralysis before Lee won a snap poll and assumed the presidency. Through the ensuing 100 days, his government has moved with unusual speed to push through domestic reforms while recalibrating South Korea’s place in global trade and security.

A central plank of Lee’s domestic program centers on steadying the housing market and expanding social protections. In Seoul, he capped mortgage loans at 600 million won (about $430,000) to curb overheating in a city where housing costs have long squeezed households’ budgets. A new labor framework has lowered some liabilities for striking workers, part of a broader effort to balance workers’ rights with business vitality. And the government distributed roughly 10 billion dollars in cash vouchers—ranging from about $110 to $330 per person, depending on income—to spur local commerce and consumption. Lee said that stabilizing South Korea’s political environment was among his biggest early achievements, a prerequisite to broader reforms and growth.

On the economic and trade front, Lee inherited a country that had fallen behind after the previous crisis and a stalled trade deal with the United States. The bilateral accord, in place since 2012, had suffered as Washington insisted on tougher terms in the wake of tariff battles. In a milestone development on July 31, Lee secured a reduction in tariffs to 15% from 25% in exchange for pledges to invest roughly $350 billion in the United States and for other concessions. The move is central to his broader aim of re-energizing an economy that grew just 2% in 2024—well below the Asia-Pacific average—and to reassert South Korea’s competitiveness in a high-stakes global economy. The deal also signals a strategic shift toward deeper economic ties with the United States and into supply-chain partnerships that Lee contends will help shield South Korea from future shocks. In parallel, his government has unveiled a long-term bet on science and technology, outlining a five-year plan to invest about $71.5 billion to transform the country into one of the world’s top three AI powers. The public push to expand digital infrastructure extends to the private sector, with a landmark move in July: Tesla announced a $16.5 billion agreement to produce AI chips at Samsung’s new semiconductor foundry in Texas, underscoring a broader aim to position South Korea as a linchpin in global AI supply chains.

The economic frame sits within a broader geopolitical strategy. Lee has cast South Korea as a bridge between East and West, aiming to balance relations with the United States and China while maintaining cordial, if wary, ties with Japan. He visited Tokyo and pledged to work as partners with Japan’s leadership as part of a joint statement with Washington—an unusually collaborative posture given historical sensitivities and regional rivalries. Lee’s intention, he said, is to anchor Seoul in the new global order by strengthening alliances and safe-guarding strategic interests in sensitive supply chains, while avoiding a blowback from China. Yet he warns that South Korea could become the front line of a broader clash between blocs if it over-commits to one side at the expense of another.

The domestic and international gambits unfold as South Korea weighs a delicate balance with North Korea. Lee argues that progress on the peninsula—especially a phased approach to sanctions relief in exchange for concessions on the North’s nuclear program—could anchor broader regional security. North Korea is estimated to possess at least 50 nuclear bombs and potentially the capacity to produce 10 to 20 a year, complicating any partial steps toward denuclearization. Lee points to a historical precedent, recalling the 1994 deal in which North Korea froze its program in exchange for energy and economic considerations, and proposes a staged path: suspending sanctions, reducing capabilities, and finally achieving denuclearization, contingent on Pyongyang’s willingness to engage. He says any outcome would require Beijing’s cooperation and a careful calibration of pressure and engagement with Pyongyang. The surrounding environment remains tense: as Beijing hosted leaders including Russia’s Vladimir Putin and North Korea’s Kim Jong Un to commemorate the end of World War II, the West described the gathering as part of an “axis of upheaval” challenging U.S.-led order. Still, Lee says Seoul can advance diplomacy by combining engagement with practical security guarantees for the alliance network surrounding it. The relationship with the United States has shown both promise and friction. In late August, Lee’s diplomacy with Washington helped secure a robust investment package, while ongoing concerns emerged after the arrest of more than 300 South Korean workers at a Hyundai Motor–LG Electric vehicle battery plant in Georgia by U.S. immigration authorities, prompting Seoul to register a formal expression of concern and regret. Lee insists South Korea will act as a “bridge of exchanges and cooperation” in the region, and that Seoul will stand with the United States on core strategic questions while carefully managing its ties with Beijing to avoid antagonizing China. The balance is delicate, and Lee has acknowledged that missteps—such as pardoning allies involved in past controversies or not fully addressing past North-South policy failures—could erode public trust if not handled transparently. Still, his approval rating, which slipped to about 51% in mid-August after a brief spike, has rebounded as investors respond to the growing commitment to growth and reform. In Lee’s telling, the key is to ensure that prosperity and secure supply chains can strengthen regional security and contribute to a more stable Asia-Pacific order. The domestic reforms, his global economic ambitions, and his careful diplomacy with Washington, Tokyo, Beijing, and Pyongyang are all part of a broader plan to extend South Korea’s influence beyond its borders while ensuring that its citizens share in any new wave of growth.

The energy challenges facing South Korea remain a constraint on what Lee hopes to achieve. His five-year budget emphasizes infrastructure and technology spending, including the GPUs needed to train and run advanced AI systems. But the country’s power grid—already strained by rising consumption and lagging expansion—must keep pace with a rapid acceleration in data centers and manufacturing. The administration is counting on a combination of private investment, public funds, and international partnerships to surmount bottlenecks, while its broader strategy to diversify supply chains and cultivate AI leadership is designed to reduce exposure to external shocks. The plan’s audacity is matched by its risk: paying for aggressive expansion while maintaining social welfare, all in a global environment marked by tariff wars, strategic competition, and deteriorating trust among allies and adversaries alike.

Lee’s personal backstory matters to how he frames his policy priorities. He rose from a poor farming family in rural Korea, dropping out of school at 13 to work in factories where wages were often withheld, and enduring a disabling injury that shaped his later resilience. He later earned admission to law school and passed the bar exam immediately after graduation, before pursuing public service and politics. He says his life taught him that opportunity can come from perseverance and that a nation’s strength comes from the ability of its people to adapt, endure hardship, and build a future together. His life narrative—rising from poverty to one of Asia’s most consequential political offices—shapes his emphasis on growth that reaches everyday households, not just corporate boardrooms.

Looking ahead, Lee is counting on a busy calendar of multilateral engagement to advance his plans. October will bring South Korea’s hosting of the Asia-Pacific Economic Cooperation for the first time in 20 years, an event he hopes will catalyze Seoul’s return to the global economic table with both the United States and China in attendance. He also faces a geopolitical moment of consequence as Xi Jinping gathered world leaders in Beijing, while Beijing and Washington continue to navigate a troubled but unavoidable relationship. Lee’s approach—maintain openness to cooperation with the United States and Japan, preserve constructive channels with China, and pursue North Korea diplomacy with clear thresholds—represents a high-wire act by design. While some critics argue that leaning too hard toward the United States risks provoking Beijing, Lee has said he intends to manage South Korea’s relationship with China so as not to “antagonize” the neighbor while ensuring that Seoul’s own security and prosperity are not compromised.

For Lee, the stakes are clear. South Korea must address a “very serious crisis” that has held back growth and destabilized youth and livelihoods. His plan—stabilize politics, boost investment, and position Seoul as a global hub for AI and critical supply chains—seeks to turn a moment of upheaval into a turning point for one of Asia’s most dynamic economies. The question now is whether these ambitious commitments can translate into sustained gains amid shifting global alignments, domestic political pressures, and the inexorable pace of technological change. As Lee put it in a recent interview, Korean people possess an “indomitable will,” and his administration aims to channel that resolve into tangible gains for the country and its partners. The next months will reveal whether the plan can produce durable growth, secure the region, and restore a sense of national momentum after a turbulent start.