Korea's Gesture: The 35 Billion Dollars the US Wants, We Truly "Can't Handle"

"Our current position is not a negotiation tactic, but rather based on objective reality. This amount is indeed beyond our capacity to bear. We cannot pay 35 billion dollars in cash," said Wi Sung-lac, South Korea's National Security Advisor, during an interview with Channel A News on the 27th, which exposed the claim by President Trump that "he would receive a large down payment from South Korea."

According to a report by the Korean newspaper "Hanmin Daily," Wi Sung-lac stated that in response to Trump's proposal of "paying money to get tariff reductions," South Korea is unable to pre-invest 35 billion dollars in the U.S. as required and is currently seeking alternative solutions.

As a senior security advisor to the president, he further emphasized that if the U.S. demands the funds be implemented in the form of "prepaid cash," no one would question South Korea's stance on the "feasibility" of this amount.

Wi Sung-lac revealed that South Korea is discussing alternative solutions and is looking toward the Asia-Pacific Economic Cooperation (APEC) summit hosted by the country in October, hoping to finalize the trade agreement with the U.S. at the summit. At that time, Trump may attend the summit.

This battle over the 35 billion dollars began in July this year: at that time, South Korea and the U.S. reached a verbal trade agreement, with the U.S. promising to reduce the 25% tariff on South Korean goods to 15%, in exchange for South Korea's commitment to establish a 35 billion dollar investment fund for the U.S., used to support South Korean companies expanding in the U.S., with 1.5 billion dollars allocated for the shipbuilding industry. In addition, South Korean private enterprises also pledged to invest an additional 1.5 billion dollars in the U.S. However, from the beginning, South Korea clearly stated that this money would be implemented in the form of loans, loan guarantees, and equity, rather than direct cash payments.

Trump clearly did not accept South Korea's "workaround." On the 25th, he loudly claimed at a press conference at the White House that "South Korea will bring 35 billion dollars upfront," and framed it as a "achievement" of his tariff policy.

He said, "We will get 35 billion dollars from South Korea, all of which are upfront payments (upfront). We have received huge income through tariffs, and this scale has never been seen before. We have never seen such a situation, and no country has ever seen it."

The Korean media "Chosun Ilbo" interpreted this as Trump reiterating that this large cash prepayment is a "hard prerequisite" for South Korea to obtain tariff reductions.

However, for South Korea, "prepaying 35 billion in cash" is almost an "impossible task." President Lee Jae-myung previously admitted in an interview with Reuters that South Korea's situation is different from Japan, which has already reached a trade agreement with the U.S.: Tokyo's foreign exchange reserves exceed 820 billion dollars, more than twice that of South Korea, and the yen is an international currency with a U.S. swap mechanism; while South Korea's foreign exchange reserves are 416.3 billion dollars, and without signing a currency swap agreement, if South Korea were to invest 35 billion dollars in cash as required by the U.S., the South Korean economy might face a crisis comparable to the 1997 financial crisis.

Data from the Korea Eximbank further shows South Korea's "inability": Over the past five years (2020-2024), South Korea's direct investment abroad amounted to 348.9 billion dollars. Foreign direct investment refers to investments made by companies to build factories and branches, not just stock investments. That is to say, the total amount invested by all South Korean companies, policy banks, government, and public institutions around the world in the past five years is less than what the U.S. requires.

If we take the "net FDI" data from the United Nations Conference on Trade and Development as a benchmark, that is, South Korea's foreign investment minus foreign investment in South Korea, then 35 billion dollars is equivalent to the total net FDI of South Korea over the past 35 years (about 362.4 billion dollars), which is about 1 billion dollars more than the total FDI to the U.S. over the years (256.3 billion dollars).

Professor Kim Un-jik from Seoul City University said, "Even including guarantees and loans, 35 billion dollars is an unimaginable scale for a single country's direct investment."

Amid the deadlock in the U.S.-South Korea trade negotiations, investors are increasingly anxious, fearing that Seoul may eventually end up with an unfair agreement, or even fail to reach an agreement altogether.

Analysts believe that it is unlikely that the U.S. and South Korea will reach a currency swap agreement. According to their disclosure, South Korean negotiators are trying to push for most of the funds to be invested in the form of loans rather than direct investment. They also urged Washington to establish mechanisms to ensure that the relevant projects are commercially viable.

Original: www.toutiao.com/article/1844483940291595/

Statement: The article represents the views of the author.