JUDY WOODRUFF: Now to the Korean Peninsula, where rhetoric escalated and the South threatened retaliation against the North for an attack on a military vessel.
Tensions mounted today over the sinking of this warship, the South Korean Cheonan, some two months ago. Last week, a team of international investigators concluded, the vessel, now raised from where it sank in the Yellow Sea, was split in two by a torpedo fired by a North Korean submarine.
Today, South Korean President Lee Myung-Bak announced his country will suspend all trade with the communist North.
LEE MYUNG-BAK, South Korean president (through translator): We have always tolerated North Korea's brutality, time and again. We did so because we have always had a genuine longing for peace on the Korean Peninsula. But now things are different. North Korea will pay a price that corresponds to its provocative acts. I will continue to take stern measures to hold the North accountable.
JUDY WOODRUFF: The move could cost the impoverished North $200 million a year. But Lee said this is a critical turning point for the two countries still technically at war. And he laid out his demands.
LEE MYUNG-BAK (through translator): Apologize immediately to the Republic of Korea and the international community. Immediately punish those who were responsible for the incident and those who were involved in the incident. These are basic measures that the North is to take before anything else.
JUDY WOODRUFF: The North's government in Pyongyang has repeatedly denied it attacked the South Korean ship, and it condemned the announcement in Seoul.
WOMAN (through translator): This is an open breach of the inter-Korean military agreement, a grave military provocation to the DPRK, and a serious incident driving the inter-Korean relations to the worst phase.
JUDY WOODRUFF: The U.S. has more than 28,000 troops in South Korea. In a statement, President Obama instructed American military commanders to coordinate closely with their South Korean counterparts to ensure readiness and deter aggression.
And Secretary of State Hillary Clinton said the U.S. fully backs South Korea's response. She was in Beijing for economic and security talks.
HILLARY RODHAM CLINTON, U.S. secretary of state: We are working hard to avoid an escalation of belligerence and provocation. This is a highly precarious situation that the North Koreans have caused in the region.
JUDY WOODRUFF: For his part, Chinese President Hu Jintao called for greater cooperation with the U.S., without mentioning North Korea directly.
HU JINTAO, Chinese president (through translator): We are facing the same issue and share common responsibilities. We're both pushing for a quick recovery and sustainable development of world economy and for managing regional hot spots and safeguarding world peace and security.
JUDY WOODRUFF: In the meantime, South Korean President Lee vowed to press the U.N. Security Council to punish the North. In New York, U.N. Secretary-General Ban Ki-Moon predicted action.
BAN KI-MOON, United Nations secretary-general: The evidence laid out in the joint international investigation report is overwhelming and deeply troubling. I fully share the widespread condemnation of the incident.
JUDY WOODRUFF: And the U.S. military announced joint naval exercises with the South Koreans in the near future. The focus will be on anti-submarine warfare.