South Korea warns investment demand could spark financial crisis

Donald Trump had previously announced that Seoul would invest $350 billion in exchange for lower tariffs.

The $350bn investment pledge demanded by the US as part of a bilateral trade deal could trigger a severe liquidity crunch, South Korean President Lee Jae Myung has told Reuters. Such a transaction risks destabilizing Asia’s fourth-largest economy and could echo past regional collapses, according to the president.

The agreement, announced by US President Donald Trump in late July, includes a sharp reduction in tariffs on Korean imports from 25% to 15%. In return, Seoul committed to major investments in the US and pledged to purchase $100bn worth of American oil and gas, among other measures.

”Without a currency swap, if we were to withdraw $350 billion in the manner that the US is demanding and invest this all in cash in the US, South Korea would face a situation similar to the financial crisis it experienced in the past,” Lee said on Monday in an interview with the news agency, stressing that the agreement requires urgent revision to avoid systemic risks.

Lee added that South Koreans were angered by what he described as the “harsh” treatment of workers after 300 Korean nationals were detained at a battery plant under construction in Georgia, following a major US immigration raid.

The feasibility of the investment package was also questioned by South Korean Foreign Minister Cho Hyun earlier this week. The minister stated that Seoul must ensure visa issues are resolved before any substantive investments can begin.

The dispute marks the latest sign of strain in Washington’s international trade ties. Under Trump’s revived economic agenda, the US has compelled several partners to commit to large-scale investments or imports under the threat of steep import tariffs.

In July, the European Union agreed to import $300bn worth of American oil and gas a year for three years, a move that current and former EU officials have described as unrealistic and potentially harmful to European energy security.