Major political developments at the end of 2024 have ushered in new unpredictability in the US-South Korea relationship for 2025. First came the re-election of Donald Trump in the United States, followed by dramatic events in South Korea that are still evolving after President Yoon Suk Yeol’s short-lived declaration of martial law. Deep political division is a powerful undercurrent contributing to both these developments, the aftermath of which will play out in unique and uncertain ways in each country over the course of 2025.

South Korean President Yoon Suk Yeol’s short-lived declaration of martial law on December 3, 2024, and his subsequent impeachment on December 14 have plunged the country into its worst political crisis in nearly 40 years, with some signs of a negative economic impact. The economy was already showing signs of weakness before the December political crisis. The additional concerns about political instability have led some forecasters to downgrade their outlook for Korea in 2025.

Kim Jong Un continues to fire ballistic missiles into the East Sea/Sea of Japan, showcasing an orderly and stable government. But this may be deceptive, aimed to fool the country’s troubled citizenry and Trump, more than it is a reality.

The last thing South Korean monetary officials need to hear about is the US Department of the Treasury’s recent addition of South Korea to its currency monitoring lists. In light of these circumstances, the South Korean government and the country’s businesses will need to be agile in dealing with these external challenges that could emerge.

There are clear indications that Kim and his government are particularly unhappy with the attention and criticism his government’s human rights violations have received. Modest changes have been made by Pyongyang to minimize human rights criticisms. That will only continue if the United States, the United Nations, and other UN member countries continue to call attention to the human rights abuses.

The economic relationship between the United States and South Korea is stronger than ever, but President Donald Trump’s promises of higher US tariffs pose risks to the relationship. As protectionist US trade policies will likely distort current trade patterns, a well-positioned South Korea could stand to benefit.