On September 22, 2025, South Korea’s President Lee Jae Myung issued a stark warning: if Seoul were to yield to current U.S. demands in their ongoing, but stalled, trade negotiations without proper safeguards, the nation’s economy could spiral into a crisis reminiscent of the infamous 1997 meltdown. Speaking to Reuters, Lee underscored the gravity of the stakes at play, drawing a direct line between today’s high-stakes diplomacy and the economic turmoil that once shook the country to its core.
The backdrop to Lee’s concerns is a tentative agreement reached in July 2025 between Seoul and Washington. According to Reuters, the U.S. would lower tariffs—many of which were imposed during President Donald Trump’s administration—on South Korean goods, in exchange for a staggering $350 billion in South Korean investment. However, Lee made clear that the commercial feasibility of such an investment remains the main stumbling block. Without prudent measures, he argued, the deal could expose South Korea to financial risks it cannot afford.
“Our economy could fall into a crisis rivaling the 1997 meltdown if we accept the current U.S. demands without safeguards,” Lee told Reuters, echoing the anxiety felt by many South Korean policymakers and business leaders. The specter of the 1997 Asian financial crisis, which led to mass layoffs, bankruptcies, and a national IMF bailout, still looms large in the country’s collective memory.
But Lee’s economic worries are not isolated. They are unfolding against a backdrop of mounting global financial instability, as events in Washington have sent shockwaves through markets worldwide. In the week before Lee’s remarks, the U.S. Federal Reserve held what World Socialist Web Site described as "one of the most extraordinary meetings since the central bank was founded in 1913," reflecting a deepening crisis in the U.S. financial system.
At the center of the turmoil is President Trump’s aggressive push to take direct control of the Fed’s governing body. His goal? To force through major interest rate cuts, thereby reducing the ballooning interest bill on U.S. government debt, which now stands at a staggering $37 trillion. As World Socialist Web Site reported, Trump’s chief economic adviser, Stephen Miran, was hastily sworn in as a member of the Fed’s Board of Governors, thanks to a rushed Senate confirmation. This unprecedented move—never before has someone still attached to a sitting administration joined the Fed’s governing body—signaled a major breach in the institution’s storied independence.
Meanwhile, controversy swirled around Fed governor Lisa Cook. Trump’s administration attempted to remove her over alleged mortgage rate ethics violations, but an appeals court ruled against the effort. The administration has now appealed to the Supreme Court, arguing that the public’s interest demands “an ethically compromised member does not continue wielding its vast powers.” In response, Cook’s attorneys warned that her removal would “subvert the Federal Reserve’s historical independence and disrupt the American economy,” potentially sending “shock waves in the financial markets that could not be easily undone.”
Trump’s motivations are twofold. He wants to lower interest rates to boost the stock market and support the burgeoning crypto market—a sector from which, according to Forbes, Trump has already earned $1 billion and stands to gain billions more. But critics argue that these moves do little for the real economy, especially as Trump-era tariffs have already raised costs for manufacturers and led to layoffs. Companies like John Deere, which has already taken a $300 million hit from tariffs, and Nike, which has reportedly lost $1 billion, are not expected to change course simply because of lower interest rates.
The ramifications of these policies are far-reaching. Interest payments on U.S. government debt are fast approaching $1 trillion, now rivaling military spending as the largest item in the federal budget. As Foreign Affairs highlighted in a recent article by former IMF chief economist Kenneth Rogoff, the U.S. has long enjoyed the ability to borrow its way out of trouble, buoyed by the dollar’s status as the world’s reserve currency. But that confidence is eroding. In 2025 alone, the dollar has lost 10% of its value against other currencies, and Deutsche Bank recently noted that “foreign investors are removing dollar exposure at an unprecedented rate.”
Gold, the traditional safe haven in times of uncertainty, has surged more than 35% this year, trading above $3,600 per ounce. Goldman Sachs predicts it could reach $4,000 by mid-2026 and possibly $5,000 if the Fed’s independence is seen to be undermined by political interference. Central banks worldwide have increased their gold reserves five-fold in the past three and a half years, making gold the second largest reserve asset after the dollar and overtaking the euro.
Against this volatile backdrop, President Lee’s caution about the U.S.-South Korea trade deal is more than just prudent—it may be essential. The proposed $350 billion investment from South Korea, while potentially opening doors for Korean goods in the U.S. market, represents a massive financial commitment at a time when global markets are anything but stable. Lee’s insistence on safeguards is rooted in the recognition that unchecked risk could spell disaster for South Korea’s economy, just as it did nearly three decades ago.
Meanwhile, Lee’s presidency is breaking new ground in other arenas. He is set to become the first South Korean president to chair a UN Security Council meeting, a symbolic milestone that underscores his growing influence on the world stage. Yet, diplomatic challenges abound. Lee expressed concern about rising tensions between democratic and socialist states, warning that the global order is becoming increasingly fragile. When asked about the prospects for renewed dialogue with North Korea, Lee was blunt: talks are unlikely for now, given the current climate.
Domestically, Lee also addressed a recent controversy involving a Hyundai immigration raid, clarifying that he does not believe former President Trump personally directed the operation. The statement, reported by Reuters, was likely aimed at easing tensions between the two countries as they navigate the complex web of trade, security, and diplomatic issues.
For both South Korea and the United States, the next steps are fraught with risk and uncertainty. The U.S. is grappling with internal battles over the independence of its central bank and the sustainability of its debt, while South Korea faces the daunting prospect of committing to a trade deal that could define its economic trajectory for years to come. As Lee’s warning makes clear, the lessons of history loom large—and the cost of ignoring them could be catastrophic.
In an era of mounting global instability, the choices made in Seoul and Washington over the coming months will reverberate far beyond their own borders, shaping the future of the global economy and the delicate balance of international relations.