South Korea, long hailed as a model democracy in East Asia, now faces an unprecedented political crisis following Yoon Suk-yeol’s martial law declaration.
In a late-night speech on December 3, 2024, Yoon declared martial law, disrupting South Korea's political order and causing domestic and international controversy. The decision, widely condemned as authoritarian overreach, triggered mass demonstrations, quick legislative backlash, and significant economic turmoil.
Lee Jae-myung, the head of the opposition Democratic Party, called on his fellow members to vote to revoke the order and encouraged citizens to demonstrate at the National Assembly. The 190 MPs in attendance, some of whom were from the president's party, unanimously decided to oppose Yoon's proclamation less than two hours after it was made. Therefore, Yoon had to declare martial law unconstitutional following the voting process.
Yoon Suk-yeol faced increasing political and legal pressure after his martial law order was widely rejected. Opposition politicians and legal experts demanded his immediate resignation and punishment, accusing him of exceeding his constitutional authority. More political unrest resulted after his detention; his opponents saw it as an essential move to maintain democratic accountability, while his supporters said the allegations were politically motivated. The incident has deepened divisions within South Korea’s political landscape, raised questions about the future stability of its leadership, and prompted a reevaluation of the country’s chaotic political history.
South Korea’s Undemocratic Past
South Korea is now seen as a stable democracy, but its history is marked by military rule and political repression. Martial law has been declared sixteen times since the country was founded in 1948, shaping its political trajectory.
One of the most notable instances occurred in 1961 when General Park Chung-hee seized power in a coup. Because of the quick economic boom, many people embraced his leadership despite his authoritarianism, which was solidified by his Yushin Constitution (1972). When General Chun Doo-hwan came to power following Park's murder in 1979, he expanded martial law and suppressed resistance. Gwangju rebelled against Chun's regime and demanded democracy in May 1980. Public dissatisfaction with military control was solidified when roughly 200 people were killed in the military's ruthless crackdown. The Gwangju Uprising was a milestone that contributed to the end of the military government, even though South Korea would not attain complete democracy until 1987.
The nation firmly established itself as a stable democracy by distancing itself from its authoritarian history, particularly after the democratic reforms of 1987. Since then, martial law has not been declared, marking a clear departure from its turbulent past. However, this decades-long period of stability was unexpectedly disrupted in 2024. Martial law was reinstated in South Korea under the leadership of President Yoon Suk-yeol.
The martial law declaration followed months of declining public support, with Yoon’s approval to just 25 percent, according to a survey conducted a week prior. Yoon has faced many obstacles throughout his administration, such as an impasse with the liberal opposition over the budget for the next year and trouble pushing his agenda in a parliament controlled by the opposition. Public trust has also been significantly damaged by his harsh criticism for not permitting independent inquiries into incidents involving his wife and top government officials. Yoon's decision to impose martial law, which many perceived as an effort to consolidate power rather than confront real threats to national stability, was the result of these growing political pressures and disputes.
However, Yoon claimed that martial law was imposed in order to deal with "anti-state forces" who were trying to sabotage South Korea's constitutional order and paralyze its vital activities. Yoon presented the declaration as being required to "save the nation" in the face of increasing instability in politics, massive demonstrations, and a conflict with a parliament controlled by the opposition. In his announcement, Yoon criticized his domestic political opponents rather than citing any specific threat from North Korea.
"Last night, I declared emergency martial law with my resolute intent to save the nation in the face of anti-state forces that attempt to paralyse the nation's essential function and the constitutional order of free democracy"- Yoon Suk-yeol
Despite Yoon's statements, the imposition of martial law had enormous economic and global repercussions that were felt almost immediately in addition to increasing political divisions.
Economic Partnerships
Although martial law lasted only a few hours, its impact on South Korea’s economy and international reputation was immediate and severe. Shortly after Yoon Suk-yeol’s declaration on December 3, worried investors started to withdraw from South Korea's financial markets. In just three days, foreign investors who had previously owned more than 35% of Korean stocks liquidated more than $1 billion. The MSCI South Korea ETF (EWY), which tracks the country’s stock market, plummeted 6.5% in less than an hour, triggering a broader selloff.
The shock rippled across global markets. South Korean stocks listed in the U.S. fell overnight, while exchange-traded funds (ETFs) like iShares MSCI South Korea ETF and Franklin FTSE South Korea ETF each lost around 1%. Domestically, Samsung Electronics dropped 1.31%, and LG Energy Solution declined 2.64%, contributing to a 2% fall in the KOSPI index.
Beyond immediate losses, investors warned of long-term consequences. Daniel Tan, a Singapore-based portfolio manager at Grasshopper Asset Management, noted that the crisis would worsen the “Korean Discount”—a term describing South Korean companies’ tendency to have lower valuations than global peers due to geopolitical risks and corporate governance concerns.
“Korea's equity benchmark KOSPI currently trades at 0.8 times its one-year forward estimated book value, while the MSCI World Index trades closer to 3 times. Investors may now demand a larger risk premium to invest in the won and Korean equities.” — Daniel Tan
The lasting effects of this crisis extend beyond immediate market turbulence. The decline in investor trust in South Korea's political and economic stability has increased worries about governance risks and raised the cost of doing business there. Markets may eventually level off, but the harm done to South Korea's economic and political reputation might discourage future international capital inflows. South Korea must take firm action to rebuild political confidence both at home and abroad to prevent long-term economic instability and further solidification of the “Korean Discount” by rebuilding trust with its allies.
US - South Korea Relations
Following Yoon Suk-yeol’s martial law declaration, the United States momentarily halted important diplomatic and security discussions with South Korea, indicating a serious strain in the alliance.
One of the main concerns was Yoon's decision to impose martial law without first consulting Washington. The United States has 28,000 troops in South Korea, which serves as a vital deterrent against a possible North Korean attack and strengthens the U.S.-South Korea alliance. These forces demonstrate the United States' commitment to protecting South Korea's legitimacy and provide the operational capability to ensure that North Korea does not consider an invasion.
Sheena Chestnut Greitens, an East Asia specialist at the Carnegie Endowment for International Peace, said that this episode might lead to a reassessment of U.S.-South Korea military coordination if there is no official necessity for such prior warning.
“The U.S. has reasonable grounds to argue that having that information in advance is necessary for effective deterrence and defense on the Korean Peninsula.” — Sheena Chestnut Greitens
Yoon's unilateral moves could harm South Korea's diplomatic standing with the incoming Trump administration, which has already questioned the worth of the U.S.-South Korea alliance. Donald Trump publicly voiced doubts about keeping the U.S. military in South Korea during his first term, once posing the question, "Why do we need all those troops there?" Seoul was even more concerned about his direct talks with North Korean leader Kim Jong Un because South Korean officials were afraid of being left out of a possible Trump-Kim agreement.
This political change raises questions about whether the incoming Trump administration will use Yoon's lack of consultation as an excuse to take unilateral measures like cutting U.S. military commitments in South Korea or negotiating a direct deal with Pyongyang.
Trump has not yet addressed Yoon's proclamation of martial law in public, but his "America First" foreign policy puts American economic and security interests ahead of long-standing alliance ties. This tendency is unlikely to reverse, according to Alex Gray, a senior fellow at the American Foreign Policy Council and a former Trump National Security Council chief of staff.
In the end, Yoon's inability to communicate with Washington has revealed weaknesses in the alliance between the United States and South Korea, casting doubt on the viability of both countries' security cooperation and diplomatic confidence. As tensions continue, South Korea faces more strategic uncertainty, especially given the possibility of changes in U.S. policy under a new president in 2025.
What’s Next?
Yoon Suk-yeol’s brief but shocking declaration of martial law has left lasting political, economic, and diplomatic repercussions for South Korea. On the one hand, his subsequent arrest and immediate rejection of martial law demonstrate that South Korea's institutions are sufficiently strong to withstand administrative overreach. Yoon was overthrown in a matter of weeks, demonstrating the strong democratic ties of modern South Korea, in contrast to Park and Chun, who ruled unquestioned for years.
On the other hand, it's concerning, though, that even a democratically elected leader tried to implement martial law. It suggests that authoritarian tendencies can still emerge in developed democracies, particularly when leaders perceive their authority to be under threat.
Going forward, South Korea faces critical decisions that will shape its political, economic, and diplomatic future. To address concerns about democratic regression, the administration must prioritize transparency and implement reforms to rebuild public trust, including opening independent investigations into recent scandals and ensuring stronger checks and balances within the political system. Reassuring investors will require clear economic policies, stability in financial markets, and efforts to promote corporate governance reforms to mitigate the 'Korean Discount.' Diplomatically, South Korea must work to repair its strained alliance with the United States by enhancing military coordination and reestablishing channels of dialogue while also strengthening ties with regional allies to ensure collective security. Though short-lived, Yoon's unplanned risk has exposed vulnerabilities that demand decisive and strategic action to prevent long-term instability.
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