South Korea’s economy at risk as Trump throws it under bus
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- Trump scrapped military exercises with South Korea after a phone call with Kim Jong Un and publicly criticized President Lee Jae Myung for refusing to support the US war effort against Iran, noting '39,000 soldiers' are stationed in Korea.
- Trump is demanding $350 billion from South Korea — roughly 18% of Korea's GDP, equal to 70% of this year's national budget and 80% of its foreign exchange reserves; Lee warned it could push Korea back into a 1997-style financial crisis.
- Seoul's National Security Adviser Wi Sung-lac said the demand is 'not a negotiating tactic,' ruling out a lump cash payment: 'We are not able to pay $350 billion in cash.'
- The Pentagon pulled its only remaining Pacific-based aircraft carrier to the Middle East, a move CFR's Joshua Kurlantzick says signals US priorities shifting away from Asia and could push allies closer to China.
- Japan is bracing for Trump's own $550 billion signing bonus demand, with Prime Minister Sanae Takaichi struggling to stay in his good graces as fresh tariffs hit Tokyo anyway.
- South Korea's exports surged 61.5% year-on-year in the first 20 days of August — semiconductor exports up 198.8%, computer-related shipments up 242.1% — though automobile exports fell roughly 45%, complicating Lee's political position.
Why it matters: Seoul has explicitly declared it cannot pay Trump's $350 billion demand, which equals roughly 18% of Korea's GDP and would require surrendering 70% of its national budget — setting up either a financial crisis or a rupture in the US-Korea alliance that risks pushing Seoul and Tokyo closer to Beijing at a moment when AI-driven Korean exports (up 61.5% YoY) are the country's main economic lifeline.
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