【By Observer Net, Wang Kaiwen】Before starting his Asian tour, U.S. President Trump said that the U.S. and South Korea are "very close" to finalizing a trade agreement.
After months of negotiations, the long-standing tug-of-war between South Korea and the U.S. may see some light. However, South Korean media is concerned that the agreement could bring more uncertainties to the South Korean economy.
"The South Korean economy is at a crossroads," read the headline of a report by Yonhap News Agency on October 26. The report pointed out that with Trump about to visit South Korea, whether both sides can reach an agreement on a $350 billion investment package from South Korea to the U.S. has become a focus of attention. However, even if both sides agree on the framework, there might still be changes in specific terms.
Additionally, the negotiation on investment to the U.S. is a prerequisite for reducing the U.S. tariff on South Korean goods from 25% to 15%, and it cannot be ruled out that the U.S. might impose additional tariffs on other core industries such as semiconductors in the future.
"Only two choices remain: either break up or reach an agreement."
Trump left Washington on the evening of October 24 local time, embarking on a nearly week-long Asian trip, where he will visit Malaysia, Japan, and South Korea. Trump is expected to arrive in South Korea on October 29 to attend the Asia-Pacific Economic Cooperation (APEC) summit and meet with South Korean President Lee Jae-myung.
On August 25, 2025, in Washington, U.S., President Trump met with South Korean President Lee Jae-myung at the White House. Oriental News
Yonhap News Agency cited opinions from South Korean political figures, pointing out that Trump's visit would place the South Korean economy at a crossroads.
According to sources from the South Korean and U.S. governments, during Trump's visit to South Korea, both sides are expected to reach an agreement on a $350 billion investment fund from South Korea to the U.S. This is a key condition for the U.S. to reduce the tariff rate on South Korean goods.
On July 31, Trump had posted that the U.S. had reached a "comprehensive and complete" trade agreement with South Korea. According to the agreement, South Korea would provide the U.S. with $350 billion for investment projects owned and controlled by the U.S. The previously announced "equivalent tariff" rate on South Korean goods would be reduced from 25% to 15%, including the largest category of South Korean exports to the U.S.—automobiles.
With disagreements emerging over the specific plans for the investment to the U.S., the trade negotiations have entered a "stalemate."
Yonhap News Agency reported on the 26th that Trump required South Korea to invest $350 billion in full direct investment, while the South Korean government proposed a combined approach of direct investment, loans, and guarantees. Due to serious differences in the scale and composition of the investment, the prospects for the negotiations remain unclear.
Over the past few months, as the tariff negotiations became stuck on specific details, uncertainty has sharply increased, causing fluctuations in the South Korean foreign exchange market.
When news of the agreement between South Korea and the U.S. on July 31 was released, the exchange rate of the South Korean won to the U.S. dollar was approximately 1,390 won; in September, when Trump threatened South Korea to "prepay" the investment amount, the exchange rate rose to 1,410 won. It is now approaching 1,440 won.
As the exchange rate of the South Korean won against the U.S. dollar increases, the amount of the $350 billion investment corresponds to an increase from 487 trillion to 504 trillion won.
Yonhap News Agency pointed out that experts expect that to avoid further intensification of uncertainty, South Korea may have to "reluctantly" reach an agreement with the U.S. during Trump's visit. On the other hand, Trump himself also needs to achieve political results. Therefore, the possibility of finding a compromise point is high.
On October 24, while traveling to Asia aboard Air Force One, Trump told the media that the U.S.-South Korea trade negotiations were "very close to completion."
The report pointed out that face-to-face talks between the two countries have largely determined the direction. It seems that the U.S. has realized that it is impossible for South Korea to come up with $350 billion in investment at once, given its economic size.
Kim Yun-jong, the Deputy Prime Minister and Minister of Planning and Finance, and Lee Chang-yong, Governor of the Bank of Korea, stated that the maximum amount of investment that South Korea can mobilize annually is approximately $15 billion to $20 billion. When asked on October 20 whether the U.S. still insisted on full cash investment, Kim Jeong-won, the Minister of Trade, Industry and Energy, replied, "It's not that far yet."
Yonhap News Agency pointed out that the main points of contention between the two sides currently lie in the proportion of cash investment and how long the payment period can be extended within the $350 billion. At the same time, the structure of profit distribution and the decision-making participation in the investment targets are also under discussion.
According to other media reports, South Korea may pay $25 billion annually, totaling $200 billion in cash investments over eight years, with the remaining $1.5 trillion executed through credit guarantees and other forms.
"Now only two options remain: either break up or reach an agreement," said Kim Gwang-sik, Director of the Economic Research Division at the Korea Institute for International Economic Policy. "I think the negotiations will be settled before the meeting between the two heads of state."
Kim Gwang-sik pointed out that if the negotiations fail, Trump would lose both achievements and political capital, and South Korea would face greater uncertainties. Therefore, a long-term investment method combining cash and loan guarantees, and allowing South Korea to participate in the decision-making on investment targets, is currently the ideal outcome.
October 21, 2025, Seoul, people held a rally near the U.S. Embassy in South Korea, holding signs reading "No Trump," protesting against Trump's push for South Korean investment and tariff policies. Oriental News
However, Professor Choi Byung-ho from Pusan National University warned that even if only $1.5 billion is invested annually, it amounts to more than 20 trillion won, and whether it can recoup costs remains unknown. "If funds are invested in projects with uncertain returns, domestic investment resources will be diverted, and employment will inevitably suffer," said Choi Byung-ho.
On the other hand, Choi Byung-ho also pointed out that if the trade agreement is delayed or the negotiations drag on, it would send negative signals to the South Korean economy, and if the U.S. uses this as a reason to further increase the 25% tariff rate, the impact on South Korea would be "very severe."
In addition, there are concerns that the details of the $350 billion investment fund may again encounter setbacks. Even if the U.S. finally agrees to partial cash payments, the possibility of foreign exchange market turbulence due to currency appreciation in the future cannot be ruled out.
South Korean President Lee Jae-myung recently told CNN that there are indeed "differences of opinion" between South Korea and the U.S. in the ongoing negotiations, but he believes both sides can ultimately reach a consensus. He praised, "Because the U.S. is a leading country in values and the free market system."
Some critics say that Trump's tariff demands are almost like "extortion," especially for a long-time ally like South Korea. When asked about his views, Lee Jae-myung just smiled, "I believe we can eventually reach a reasonable result that both sides can accept."
Even if an agreement is reached, then what?
Yonhap News Agency pointed out that even if South Korea and the U.S. eventually reach a trade agreement in some way, the U.S. still has the possibility of imposing additional tariffs on certain products in the future.
Currently, the U.S. has imposed a 50% tariff on all imported steel and aluminum and their derivatives.
The report pointed out that in July, South Korea's steel exports to the U.S. amounted to $280 million, a decrease of 26% year-on-year, indicating that South Korea has already been affected by the product tariffs. If the U.S. imposes high tariffs on South Korea's main products, such as semiconductors, the impact on South Korea's exports to the U.S. would be self-evident.
Although U.S. Commerce Secretary Ruttig stated that South Korea would not be treated worse than other countries in the semiconductor and pharmaceutical sectors, given the fickle nature of the Trump administration, such statements cannot be fully trusted.
According to reports, the U.S. Department of Commerce is currently investigating the impact of imports of semiconductors, semiconductor manufacturing equipment, and their derivatives on national security. The originally scheduled August release of the investigation results has not been published, and Trump continues to threaten to impose a 100% tariff on semiconductors.
Although some viewpoints suggest that the likelihood of imposing a 100% tariff on semiconductors is low as long as the U.S. domestic artificial intelligence industry investment boom continues, Choi Byung-ho warned, "Before the final agreement is signed, anything is possible. Just like the results document from the previous U.S.-South Korea summit, it was always full of uncertainty before signing, and the issue of product tariffs is the same."
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