A plan for South Korea to invest $200 billion in the U.S. over eight years, at $25 billion annually, is reportedly under discussion between the two countries to resolve their tariff negotiations, as revealed on the 22nd. A Washington source stated the same day, “Out of $350 billion, $150 billion would be covered through credit guarantees, and South Korea would contribute $200 billion. I understand this proposal reflects the U.S. side’s intentions.”
This approach reduces South Korea’s equity investment and extends the timeline compared to the previous U.S. demand for an upfront payment of $350 billion within President Donald Trump’s term (until January 2029). However, even $25 billion annually exceeds South Korea’s manageable foreign exchange scale (between $15 billion and $20 billion) without market shock, posing a significant burden.
Kim Yong-beom, presidential chief of staff for policy, and Kim Jung-kwan, Minister of Trade, Industry and Resources, departed for the U.S. on the same day to discuss follow-up measures on the investment. Kim Yong-beom, who returned on the 19th, and Kim Jung-kwan, who returned on the 20th, embarked on another trip to the U.S. after three and two days, respectively. With the anticipated Korea-U.S. summit on the 29th just a week away, this can be seen as a final negotiation push. It was reported that Kim Yong-beom and others briefed President Lee Jae-myung the previous day on their negotiations with U.S. Commerce Secretary Howard Lutnick last week and received negotiation guidelines.
However, Kim Yong-beom stated on the same day, “The government is not considering signing an MOU (memorandum of understanding) with only partial agreements, leaving critical issues unresolved due to a specific timeline like APEC.”
◇ U.S. Seen as Recognizing Difficulty of $350 Billion Upfront Payment... Focus on Installment Settlement
The discussion of South Korea’s $200 billion “phased investment” over eight years at $25 billion annually suggests the U.S. government acknowledges the impossibility of Trump’s demand for a $350 billion upfront payment. As of late last month, South Korea’s foreign reserves stood at $422 billion, with $350 billion accounting for approximately 83%. The proposed phased investment reduces the cash investment amount and avoids a lump-sum payment.
When asked upon his return to the U.S. on the 20th whether the U.S. still demands full cash investment, Kim Jung-kwan replied, “Not to that extent,” adding, “The U.S. has accepted many of our proposals.” However, even $200 billion remains a heavy burden for full cash investment, with unresolved issues such as selecting investment destinations and profit distribution.
Before departing on the 22nd, Kim Yong-beom told reporters at Incheon Airport, “We are going to create a negotiation proposal that aligns with South Korea’s national interests, not the U.S.’s final demand.” He continued, “While we have narrowed differences on many issues, there are still one or two areas of intense disagreement. We are heading back to reach a settlement that serves our national interests in those areas.”
◊ Government Must Mobilize All ‘Available Foreign Reserves’
Rhee Chang-yong, Governor of the Bank of Korea, stated during a National Assembly audit on the 20th that South Korea can procure foreign currency between $15 billion and $20 billion annually without market shock. The proposed $25 billion annually requires mobilizing the maximum available foreign reserves, burdening the government.
However, as the U.S. is aware of South Korea’s foreign reserve limits, it may view this as the “maximum extractable amount” from South Korea. A ruling party official said on the same day, “I heard President Lee Jae-myung was furious after receiving a report from Kim Yong-beom, who returned from the U.S. on the 21st,” implying the U.S. continues to make demanding requests.
It remains unclear whether the $200 billion over eight years is a full cash demand or includes loans with repayment potential. Profit distribution is another key issue. Kim Yong-beom previously disclosed that the U.S. demanded a 10-90 profit split in favor of the U.S. last month. A compromise on this ratio is necessary for an MOU. According to the MOU announced by the U.S. and Japan on August 4, profits are split 50-50 until investment recovery, after which the U.S. receives 90%. South Korea insists on retaining 90% until recovery but may face Japan-like terms if the U.S. reduces cash investment demands.
◊ Trump Seeks ‘Tour Ceremony’
The proposal for $25 billion annual investments over eight years is interpreted as tied to Trump’s first Asia tour of his second term, starting on the 26th. Before his state visit to South Korea on the 29th–30th, Trump will visit Malaysia and Japan. A diplomatic source said, “I understand Trump plans to heavily promote his achievements in attracting investments during his meeting with Japanese Prime Minister Sanae Takaichi.” Arriving in South Korea shortly after, he likely wants to announce a “settlement document” including a large investment plan.
However, Kim Yong-beom emphasized, “The government is not considering an MOU with only partial agreements, leaving critical issues unresolved due to a specific timeline like APEC,” adding, “A complete MOU that implements the agreement reached on July 31 must be finalized for it to be considered a success.” This indicates reluctance to rush an MOU with partial agreements ahead of the summit.
Nonetheless, Kim Yong-beom noted, “There were many provisional agreements during the August Washington summit, including security issues being coordinated by National Security Adviser Wi Sung-lac. Once the trade MOU is finalized, trade outcomes could be announced alongside other achievements.”
Kim Yong-beom and Kim Jung-kwan plan to return immediately after a one-day schedule meeting Howard Lutnick. If no agreement is reached, negotiations could extend beyond APEC. Kim Yong-beom said, “Negotiations depend on the other party and changing circumstances, making predictions difficult.” A presidential office official stated, “The situation depends on whether the U.S. accepts our proposals. It’s neither optimistic nor pessimistic.”