South Korea's Yoon declares martial law in emergency address

Soo-Hyang Choi, Bloomberg News on Dec 3, 2024

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South Korean President Yoon Suk Yeol declared martial law on Tuesday in an emergency national address televised live as he accused the opposition of trying to paralyze the administration amid a deepening political rift.

Yoon said the decision was made to protect freedom and constitutional order, and that it will not have an impact on South Korea’s foreign policy. He added that it would also help remove North Korea supporters.

“Through the declaration of martial law, I will rebuild and protect a free South Korea,” Yoon said. A proclamation released after the address banned all political activities and strikes and said media would be subject to control of the Martial Law Command, according to Yonhap News.

The won tumbled to its lowest level in over two years while Samsung Electronics’ London-listed shares fell as much as 5.5%. The Korea Exchange said it would operate under normal hours on Wednesday.

The shock move comes after months of wrangling and deadlock in parliament between Yoon’s minority government and the main opposition Democratic Party. The DP is currently trying to force through its own budget proposal through parliament and has submitted an impeachment motion against the chief prosecutor. The DP’s leader has faced multiple court cases and was convicted last month of election-law violations.

Yoon has dealt with the deadlock in a largely standoffish manner, vetoing a string of bills passed by parliament and at times angering his own party.

“The president’s declaration of martial law is wrong,” Han Dong-hoon, head of Yoon’s People Power Party, said in a Facebook post. “I will stop this with people.”

South Korea’s defense minister ordered a meeting with the military’s top commanders and the finance minister also called an emergency meeting, according to Yonhap.

“Seems like an extreme use of the martial law, with the headline coming out of nowhere,” said Olga Yangol, the head of emerging markets research and strategy at Credit Agricole. “It is not clear what this means in practice.”

The move comes at a time of high uncertainty for the nation as its trade-dependent economy faces potential tariffs from President-elect Donald Trump’s incoming administration. Bloomberg Economics estimates that full imposition of tariffs on China, South Korea and other U.S. trading partners could reduce Seoul’s exports to the U.S. by as much as 55%.

Meanwhile, North Korea continues to deepen its ties with Russia, having sent thousands of troops there to help in Moscow’s war against Ukraine. Russia’s defense minister visited Pyongyang last week in the latest sign of talks between the two countries. Russia may help provide North Korea key technology for its weapons programs including its intercontinental ballistic missiles.

“The domestic uncertainty adds to the external pressures in recent weeks as the market is starting to price in the rise of higher U.S. tariffs under the new Trump administration,” said Aroop Chatterjee, a strategist at Wells Fargo. “Korea is an open economy sensitive to shifts in global export demand and and spillovers from a weaker China.”

The Democratic Party ordered its members to gather at parliament to discuss steps to lift the martial law, Yonhap said. South Korean broadcaster YTN showed police restricting entry to the parliament compound as people gathered neared the gate.

Under the country’s constitution, the president has to comply if the parliament requests the lifting of martial law with the concurrent vote of a majority of the total members.

“South Korean leadership has used this in the past during times of significant political unrest or transitions of power but it is concerning none-the-less,” said Brad Bechtel, global head of FX at Jefferies. He sees the won staying volatile for the time being. “A lot will depend upon the reaction of offshore investors in the local equities markets. If they start selling aggressively then we could get to 1450.”

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With assistance from Daedo Kim, Yoolim Lee, Kerim Karakaya and Anya Andrianova.