On June 6, South Korean President Lee Jae-myung and U.S. President Donald Trump held their first phone call, reaffirming the strength and strategic importance of their countries’ alliance. Earlier, in his nationally televised inauguration speech at the National Assembly, Lee emphasized his intent to maintain close diplomatic cooperation with the Trump administration – particularly around trade negotiations and national security – and pledged to deepen trilateral relations with the United States and Japan. At the same time, Lee inherits a volatile economic landscape shaped by Trump’s tariffs, which continue to strain South Korea’s key export industries. Most notably, the United States has imposed steep tariffs under Section 232 of the Trade Expansion Act of 1962, citing national security concerns. While originally designed during the Cold War to protect U.S. industry from existential threats, this law has been reinterpreted in recent years to justify sweeping trade restrictions – even against close allies like South Korea. These measures have placed immense pressure on South Korea’s steel and automotive sectors, triggering both economic losses and strategic recalibration. The numbers tell the story. In March 2025, South Korea's steel shipments to the U.S. fell by 19.3 percent following the reimposition of tariffs. On June 4, the United States doubled its tariff on imported steel and aluminum to 50 percent. The automotive sector – long a pillar of Korea’s export economy – has also taken a hit. In May 2025, car exports declined by 4.4 percent, largely due to the 25 percent tariff on imported vehicles and light trucks. That same month, total exports to the U.S. dropped 8.1 percent, following a 6.8 percent decline in April. Overall, South Korea’s global exports fell 1.3 percent to $57.27 billion in May, marking the first decline in four months. Yet even amid these losses, the country managed to post a $6.94 billion trade surplus – the largest since June 2024 – underscoring the resilience of its broader export base. Still, the ripple effects of these tariffs extend beyond headline trade statistics, exposing deeper vulnerabilities in South Korea’s export-dependent economy. In May 2025, the Manufacturing Purchasing Managers’ Index (PMI) fell to 47.7, signaling a contraction in factory activity for the second consecutive month. The decline reflects softening global demand and increased uncertainty among manufacturers, particularly those linked to the U.S. market. With the United States absorbing a significant share of South Korea’s industrial output – especially in high-value sectors like automobiles – the tariffs have had a multiplier effect on upstream suppliers and regional labor markets. The automotive industry, which exported $34.7 billion worth of vehicles to the U.S. in 2024 – nearly half of its total auto exports – has been among the hardest hit. The imposition of a 25 percent tariff has disrupted not just trade flows but also investment planning, inventory management, and employment forecasts across the sector. This shock is reverberating through production hubs like Ulsan and Gyeonggi Province, where firms are scaling back overtime shifts and delaying new hires amid weakened demand forecasts. The broader implication is that tariffs, rather than simply redirecting trade, are eroding South Korea’s industrial confidence and tightening labor market flexibility in sectors already grappling with automation and global competition. In response, major Korean firms are making bold strategic moves to stay ahead. Hyundai Motor Group has announced a $20 billion investment in the United States, including a $5.8 billion steel plant in Louisiana. Samsung Electronics is considering relocating the production of TVs and home appliances to U.S. soil in order to bypass the 25 percent tariff, which remains under a 90-day negotiation pause. These moves are not merely tactical; they suggest a long-term recalibration of Korean industrial strategy in response to protectionist pressure. This economic friction is unfolding alongside a larger debate within South Korea about its role in an increasingly polarized global order. While the United States remains its only military ally, China is its largest trading partner – accounting for 25.1 percent of South Korea’s total exports in 2023, compared to 18.3 percent for the United States. Lee has taken a cautious tone to the China-U.S. competition, avoiding direct criticism of Beijing while affirming his commitment to the U.S. alliance. In his inauguration speech, he referenced managing relations with “neighboring countries” from a pragmatic perspective driven by national interests. This duality reflects growing public sentiment in South Korea. While support for the U.S. alliance remains strong, there is increasing demand for greater autonomy in economic decision-making and a more balanced foreign policy. Recent opinion polls indicate that many South Koreans favor diversifying trade partnerships to reduce dependence on any single market – be it Washington or Beijing. The public expects the government to prioritize national economic interests in a time of heightened geopolitical competition. As Lee faces a July 8 deadline to conclude trade talks with the Trump administration, he finds himself at the intersection of diplomacy, industry, and domestic expectation. Tariffs may appear as simple levers of policy on the surface, but their consequences run deep – reshaping supply chains, investor confidence, and the political calculus of a nation long accustomed to walking the tightrope between two global powers.