China’s rise and the intensifying strategic competition between Beijing and Washington have driven South Korea to a crossroads in its foreign policy shift that is both old and new.
Seoul’s classic diplomatic formula in the past decades, widely referred to as “security with Washington, economy with Beijing,” was once a prominent and practical division of labor. In it, the US guaranteed security for South Korea, and China empowered its export-led economic growth. Nonetheless, it is now pushed closer to deciding on how to reposition itself in response to the growing uncertainties, rooted in the tensions between the two great powers.
Seoul’s choices will profoundly impact its economic ties and deterrence on the Korean Peninsula, potentially reverberating across East Asia and highlighting the interconnectedness of regional security and prosperity. Therefore, South Korea’s diplomatic balancing act is crucial for its national interests and for maintaining stability in the Indo-Pacific region.
Seoul is now pushed closer to deciding on how to reposition itself in response to the growing uncertainties, rooted in the tensions between the two great powers
This intricate tightrope walk demands a nuanced and adaptive foreign policy. China’s increasing military and technological capabilities necessitate that South Korea move away from its indefinite reliance on conventional foreign policy that could increase its vulnerability to Chinese aggression.
This intersection shows another dimension of Seoul’s challenge: getting away from reactive diplomacy to proactive engagement with the region, not just balancing economic and security factors but transcending its diplomacy’s ‘within the box’ character in the restructuring of the Indo-Pacific.
Economic Dependence on China
China has long been South Korea’s dominant economic partner in terms of trade volumes and supply chain, making Beijing an indispensable part of Seoul’s exporters and manufacturers. In goods terms, China is the top export market for many of South Korea’s high-value products, such as semiconductors and displays, making up 20% of South Korean exports. South Korean companies, such as Samsung and SK Hynix, have also set up their production plants in the country, thanks to its geographical proximity and a complex web of investments.
However, recent geopolitical shifts and supply chain vulnerabilities have prompted Seoul to consider diversifying its economic partnerships. China has increasingly used its leverage to project its political interest in South Korea, further highlighting the urgency of reducing over-reliance on a single economic partner. For instance, Beijing’s retaliation against Seoul for its deployment of the Terminal High-Altitude Area Defense (THAAD) system in 2016 illustrated how quickly targeted measures, from limits on group tourism to regulatory scrutiny and informal boycotts, can impact South Korean companies and service sectors. This suggests that economic pain can be employed as a foreign policy tool.
More recently, China’s licensing requirements for the trade of its critical minerals and rare earth products have amplified concerns that a broader industrial dispute or export controls could disrupt key South Korean supply lines. As these minerals have extensive applications in South Korea’s core industries, ranging from the semiconductor industry to defense, which has a direct impact on national security, Seoul needs to rethink its economic and trade policy with China to reduce such vulnerability.
Moreover, this strategic reassessment is not only necessary to mitigate risks but also to enhance South Korea’s economic resilience in a rapidly changing global landscape. For the first time in over two decades, South Korea has been running a trade deficit with China, reaching $18 billion in 2023. This marks a significant reversal from the long-standing trade surplus that South Korea had enjoyed with its largest trading partner since the normalization of diplomatic relations in 1992. This shift highlights the continuing weakening of South Korea’s export competitiveness structurally, and economically, the diminishing importance of China as an economic buffer for South Korea. It indicates that South Korea is continuously losing its comparative advantage to China, which may lead to weaker global trade competitiveness.
South Korea is continuously losing its comparative advantage to China, which may lead to weaker global trade competitiveness
As a result of this reconfiguration, Seoul had to rethink its security postures rather than the other way around. South Korea’s dependence on China geopolitically exposed the limits of the two-track system, wherein Beijing was economically dominant and Washington was militarily dominant. Seoul’s reliance on Beijing has shifted the value of economic relations from a strategic asset to a geopolitical liability. South Korea’s economic interdependence has pushed Seoul to pursue strategic counter-relationships to gain the confidence it lost from uneven economic relations with China.
China has also increased its advanced technological capabilities, which have begun to catch up with South Korea’s comparative advantages in the automobile and shipbuilding industries. Relying on China for economic growth despite its decreasing competitiveness in the Chinese and global markets contradicts Seoul’s long-standing policy of utilizing China for its economic growth, necessitating the need to diversify economic partners and invest in new growth engines to maintain its competitive edge.
The US Security Umbrella
South Korea’s national security framework, on the other hand, is fundamentally reliant on its robust alliance with the US. This partnership, dating back to the Korean War, remains the foundation of South Korea’s defense posture, with approximately 28,500 US Forces Korea (USFK) troops stationed on the Korean Peninsula, operating under sophisticated combined command arrangements.
The US–ROK alliance provides a comprehensive suite of security guarantees. Foremost among these is extended deterrence, a critical component that assures Seoul of Washington’s commitment to utilize the full spectrum of its military capabilities, including a nuclear umbrella over South Korea, to defend against any external aggression, thereby significantly mitigating its inherent vulnerability to threats from Pyongyang. This commitment was demonstrated in the establishment of the Nuclear Consultative Group (NCG) in 2023, a bilateral body to strengthen extended deterrence, discuss nuclear and strategic planning, and manage the threat to the nonproliferation regime.
Furthermore, the alliance has successfully integrated advanced missile-defense elements, such as the THAAD system, into its bilateral cooperation framework. This integration has occurred despite notable objections from Beijing, underscoring the allies’ determination to bolster their defensive capabilities against evolving threats.
These capabilities, both conventional and strategic, coupled with the explicit political guarantee from the US, are central to Seoul’s ongoing assessment of its vulnerability to North Korean provocations. The alliance thus serves not only as a deterrent but also as a fundamental shaping factor in South Korea’s strategic calculations regarding its national security and regional stability.
The US–ROK alliance serves not only as a deterrent but also as a fundamental shaping factor in South Korea’s strategic calculations regarding its national security and regional stability
US Push for ‘Modernizing’ the Alliance
However, since the inauguration of US President Donald Trump, his administration’s pressure on South Korea has been pushing the country to “modernize” the alliance with the US. The Trump administration has been demanding that its Asian allies spend at least 3.5% of their GDP on defense spending. The desire to modernize comes less from Washington’s altruism and more from its strategic need to redistribute and offload some of its global commitments from Eastern Europe and the Indo-Pacific. By recasting burden sharing as modernization, Washington is signaling a new phase in its provision of selective security guarantees. This phase presumes that partners will self-fund their deterrence and take increased responsibility for collective defense.
Elbridge Colby, the undersecretary at the Pentagon, has also been a major proponent of the containment strategy against China. The strategy envisions transferring of the USFK’s role from deterrence against North Korea to checking China’s influence, while leaving the threats from Pyongyang to the South Korean military. In this regard, Colby has also stated in media interviews that he would be open to including South Korea’s nuclear capabilities on the negotiating table in the restructuring of the USFK.
The possibility of a shift in the US commitment to defending South Korea, therefore, poses a significant concern for the country’s national security. But this does not mean the end of the US-ROK alliance. In fact, Colby advocated the necessity of the partnership considering the Korean Peninsula’s proximity to China. However, the potential shift could necessitate a re-evaluation of South Korea’s defense strategies and alliances, as Seoul now needs to bear a greater share of the burden for the upkeep of US troops stationed on the peninsula.
The possibility of a shift in the US commitment to defending South Korea poses a significant concern for the country’s national security
Consequently, Seoul might need to settle new ground with Washington to modernize the alliance. This could possibly see the US transfer wartime operational command to South Korea or expand the South Korean military’s role beyond the Korean Peninsula to the broader Asia-Pacific region. It also means Seoul should consider the development of nuclear weapons, increase investment in the defense industry and technology, and explore new avenues for ensuring its sovereignty and regional stability.
Seoul’s Recent Shifts from Balancing and Hedging Policies
Seoul’s foreign policy has been a prime example of hedging: maintaining its alliance with Washington while minimizing political friction with Beijing. In practice, this means cooperating on security matters, such as joint exercises, intelligence sharing, and missile defense, while avoiding explicit anti-China rhetoric or formal blocs. This diplomatic positioning was also reflected in South Korea’s engagement with regional frameworks, where Seoul has maintained a cautious distance from apparent anti-China groups, as evidenced by its distancing from the Quad.
However, as the strategic competition between the US and China intensifies, and the Trump administration pressures Seoul to increase its efforts in supporting its China containment strategy, South Korea now faces a dilemma in its security and diplomacy. Maintaining its vulnerability to China’s trade restrictions also raises uncertainty about Beijing’s possible retaliation, which restrains Seoul’s diplomatic choices.
Hence, it is necessary for South Korea to actively reduce its over-reliance on China and explore avenues for cooperation with like-minded countries, reflecting a gradual alignment with Washington. This trend is evident in its pursuit of engagement with the AUKUS Pillar II framework, specifically focusing on advanced defense technology-sharing capabilities. This potential collaboration, centered on strategic technology sharing, robust industrial partnerships, and joint research and development, contributes to a broader strategic alignment among allies and partners in the Asia-Pacific region. The meticulous tailoring of these collaborations to South Korea’s technological capabilities and geopolitical considerations further underscores this intentional shift. This cautious but deliberate shift reflects Seoul’s recognition that hedging has reached its limits; neutrality now carries higher costs than alignment.
This cautious but deliberate shift reflects Seoul’s recognition that hedging has reached its limits; neutrality now carries higher costs than alignment
Seoul’s departure from the conventional two-way approach to the US and China is also observed in recent administrations’ increasing alignment with Washington. During the previous Yoon Suk-yeol administration, Seoul emphasized the significance of the alliance with the US and “strategic certainty,” addressing stability in the Taiwan Strait and the South China Sea as key roles South Korea should play in the Indo-Pacific region. This period marked South Korea’s active engagement in trilateral security cooperation with the United States and Japan, addressing not only North Korean nuclear missile threats but also responding to potential conflicts with China. The trilateral “Freedom Edge” series and frequent high-level coordination signal the closer operational ties among the three democracies, illustrating a consistent move towards Washington.
The deepening trilateral cooperation with the United States and Japan also signals a generational shift in Seoul’s strategic mindset, moving from transactional balancing to value based alignment.
While Seoul has seen a power shift from a conservative to a liberal government, the overarching trend of reducing vulnerabilities from China and strengthening ties with Washington remains consistent. The newly elected President Lee Jae-myung has stated that South Korea can no longer maintain a “security for Washington, economy for Beijing” stance, pledging to continue strengthening the alliance with the US through trilateral cooperation while also increasing economic cooperation with Washington. Such an approach signifies Seoul’s continued strategic pivot, reflecting a broader regional trend among nations reassessing economic dependencies and diversifying partnerships in an increasingly complex geopolitical landscape, all pointing towards a sustained and gradual alignment with the United States.
Beyond the Old Formula
South Korea is undergoing a significant foreign policy shift, moving away from its traditional “security with Washington, economy with Beijing” strategy. This change is driven by the intensifying competition between the US and China, which makes it difficult for South Korea to remain neutral. Additionally, South Korea’s economic dependence on China has exposed it to vulnerabilities, prompting a need for diversification. As a result, Seoul is reevaluating its economic and national security dependencies, focusing on strengthening alliances with democratic nations, building self-reliance in key industries, and developing a more resilient foreign policy.
This strategic pivot signifies that Seoul is strengthening its alliance with the US and cultivating trilateral cooperation to enhance security. It is also diversifying global economic partnerships to reduce reliance on any single power, particularly China. This reorientation reflects a broader regional trend in the Indo-Pacific, where nations are prioritizing resilience and stability through diversified alliances and economic ties to navigate a complex geopolitical environment.
What’s crystallizing now is not just a political quake, but a reshuffling of regional power in which South Korea may cease to be an antipodean backwater for the Americans and instead become an essential pivot in framing the balance in the Indo-Pacific.
Ultimately, Seoul’s strategic pivot underscores a fundamental dilemma: how to secure its future in a rapidly shifting global order without alienating key economic partners, a balancing act that will define its geopolitical trajectory for decades to come. This remaking of Seoul’s foreign policy will not only chart its own course but could also reset the contours of the larger strategic order in East Asia.
The remaking of Seoul’s foreign policy will not only chart its own course but could also reset the contours of the larger strategic order in East Asia
Future Scenarios for South Korea
What path Seoul takes will depend on whether it sees strategic ambiguity as a feasible posture, or an outdated luxury in a bipolar world. The vignettes below describe some of the paths that Seoul could embark on to deal with a changing strategic order.
Scenario 1: Managed Ambiguity
Despite the increasing pressures from both the US and China, South Korea attempts to maintain its traditional “security with Washington, economy with Beijing” approach, albeit with greater difficulty. Seoul continues to engage with the US in security cooperation through joint exercises and intelligence sharing but refrains from overtly anti-China rhetoric or joining formal blocs like the Quad.
This scenario sees Seoul trying to navigate the strategic competition by emphasizing its role as a bridge between the two powers, advocating for dialogue and de-escalation. However, this strategy becomes increasingly tenuous as the US demands greater alignment against China and Beijing employs economic coercion more frequently, leaving South Korea vulnerable to the whims of both great powers.
This sort of indecision would damage Seoul’s credibility and constrain its options to influence regional trends.
Scenario 2: Strategic Alignment with Washington
Driven by growing security concerns, particularly regarding China’s military and technological advancements and its potential for economic aggression, South Korea decisively strengthens its alliance with the US. This involves expanding its role in trilateral security cooperation with the US and Japan, actively participating in frameworks like AUKUS Pillar II for sharing advanced defense technology, and taking a more vocal stance on regional security issues like the Taiwan Strait and the South China Sea.
This scenario could see South Korea aligning its trade policies more closely with US initiatives, potentially joining economic blocs that exclude or limit China, and even facing direct retaliation from Beijing. While this provides enhanced security guarantees from Washington, it also entails a significant and potentially costly reorientation of its economic structure. This scenario appears more realistic at the moment, considering Washington’s pressure on its allies to increase cooperation on economic and military containment against China. It would prompt Seoul to adopt a safer path in strengthening alliance cooperation, given the escalating tensions in the Indo-Pacific.
This trajectory could consolidate US-led containment in Asia, but at the cost of Seoul’s strategic flexibility.
Scenario 3: Autonomous Diversification
Recognizing the limitations and vulnerabilities of being overly dependent on either the US or China, South Korea embarks on a path of strategic autonomy. While maintaining its core alliance with the US for defense, Seoul actively seeks to expand its diplomatic and economic partnerships beyond the immediate sphere of US-China competition. This involves deepening ties with European countries for advanced technology, defense capabilities, and diversified trade markets. Concurrently, South Korea strengthens its relationships with other like-minded Asian partners, such as Southeast Asian nations, India, and Australia, to build regional resilience and create alternative supply chains.
This scenario emphasizes South Korea’s independent foreign policy, allowing it to address its national interests without being solely dictated by the US-China rivalry. It would involve significant investment in its own defense industry and technological capabilities, fostering multilateral cooperation in various fields, and promoting a rules-based international order that is not exclusively dominated by either Washington or Beijing. This approach aims to reduce South Korea’s vulnerability by creating a broader network of partners and enhancing its own capacity for self-reliance.
The underlying goal of this approach is to reduce the ease of coercion by expanding South Korea’s network of partners, and enhancing its own self-reliance capabilities.
Autonomy provides a degree of leeway but, in times of turmoil, can lead to being stranded while Seoul does nothing. The future of Seoul will depend on whether Seoul thinks of strategic ambiguity as an enduring position, rather than as something to be used while it lasts in a bipolar world.
