South Korea’s Lead Presidential Candidate Eyes Trade, Pragmatism: What Investors Need to Know

As South Korea’s presidential election approaches, Democratic Party frontrunner Lee Jae-myung has solidified his position as the likely winner, promising a pragmatic approach to trade tensions with the U.S. and sweeping economic reforms. With the nation’s trade surplus at a record $55.6 billion in 2024 and 25% U.S. tariffs threatening its automotive and shipbuilding sectors, Lee’s policies could reshape investment opportunities in the region.

Lee Jae-myung’s Rise and Trade Priorities

Lee’s dominance in recent polls—reaching 50.2% support in April 2025 (per Real Meter)—reflects voter disillusionment with conservative leadership after former President Yoon Suk-yeol’s impeachment. His campaign emphasizes balancing trade negotiations with the U.S. while prioritizing domestic economic stability. Key areas of focus include:

1. Auto Industry Relief: Hyundai and Kia face crippling 25% tariffs on U.S. exports, which account for 49% of their auto exports. Lee has proposed emergency subsidies and infrastructure investments to offset losses, potentially easing investor concerns in the sector.
2. Shipbuilding Leverage: South Korea, the world’s second-largest shipbuilder, aims to use its industry as a bargaining chip in U.S. trade talks. Lee may push for deeper U.S.-South Korean collaboration to secure tariff relief.
3. Corporate Governance Overhaul: To address the “Korea discount”—a stock undervaluation due to governance flaws—he seeks to double the Kospi index to 5,000 points by improving transparency and shareholder rights.

The U.S. Trade Negotiations: Risks and Opportunities

The U.S. tariffs, imposed under President Trump’s administration, remain a critical hurdle. Lee’s predecessor, Acting President Han Duck-soo, has engaged in “win-win” negotiations over shipbuilding and LNG deals, but progress hinges on a post-election administration.

Investors should monitor:
- U.S.-South Korea Trade Surplus: A reduction could ease tariffs, benefiting automotive stocks like Hyundai Motor (HYMLF) and Kia (KIMTF).
- Shipbuilding Contracts: Companies like Hyundai Heavy Industries (HHI) may gain if bilateral deals materialize.

Economic Reforms: The Kospi and Regional Development

Lee’s pledge to revitalize the Kospi—a 40% undervaluation compared to global peers—could attract capital to undervalued sectors. His plan includes relocating government ministries to cities like Busan and creating industry clusters in Daegu, potentially boosting regional equity markets.

However, risks persist. Lee faces five ongoing corruption trials, though presidential immunity would halt proceedings. His DPK’s legislative majority provides a policy tailwind, but polarization and conservative infighting (the People Power Party’s 6% support for Han Duck-soo) could disrupt reforms.

Investment Implications

1. Auto Sector: Hyundai (HYMLF) and Kia (KIMTF) stocks could rebound if tariffs ease, but near-term volatility remains.
2. Corporate Governance Plays: Firms with strong minority shareholder protections—e.g., Samsung Electronics (SSNLF)—may outperform as reforms take hold.
3. Regional Infrastructure: Real estate and construction stocks in Busan and Daegu could benefit from Lee’s development plans.

Conclusion: A Pragmatic Path Forward

Lee Jae-myung’s lead underscores investor optimism in a stable, reform-oriented government. With a 50.2% poll lead and the DPK’s National Assembly majority, his policies to address the “Korea discount” and navigate U.S. trade talks could unlock value in undervalued sectors. However, lingering risks—U.S. tariff outcomes and Lee’s legal challenges—demand caution.

For now, the data points to a bullish outlook: a potential 50% Kospi target, a 23–29% conservative bloc support gap, and Lee’s 35-point leads in head-to-head polls suggest a clear path to victory. Investors should prioritize sectors tied to corporate governance reforms and trade resolution, while hedging against geopolitical uncertainty.

The June election could mark a turning point for South Korea’s economy—a blend of pragmatism and reform that investors would be wise to watch closely.