South Korea and the U. S. Talk Big Money

South Korea and the United States are in talks about a huge investment deal. The focus is on how to structure a $350 billion investment pledge from South Korea. This is different from earlier talks about a currency swap. The finance minister of South Korea, Koo Yun Cheol, said that the U. S. Treasury Secretary understands the challenges South Korea faces with its currency market. The Korean won has been weak lately. This is partly because the investment deal is not yet finalized. There are also concerns about car tariffs and new technologies like AI. The Korean won had a small jump when news of the talks came out. But it didn't keep that gain. Still, it was one of the best-performing currencies among emerging markets that day. U. S. President Donald Trump is going to South Korea soon. He will meet with South Korean President Lee Jae Myung and Chinese President Xi Jinping. These meetings could shape trade relations for years to come. South Korea wants a balanced investment package. This could include direct investments, loans, and guarantees. The exact breakdown is still being discussed. The need for a currency swap will depend on how the deal is structured. The prime minister of South Korea had earlier said that the investment pledge could shock the economy without a swap agreement. The Bank of Korea said that $20 billion a year is the most the government can provide without affecting the currency market. South Korean officials are working hard to finalize the deal during the upcoming APEC summit. They are aiming to meet this goal. This comes after a separate $550 billion investment pledge between the U. S. and Japan. That deal had some conditions that raised eyebrows. The negotiations between the U. S. and South Korea have been going on for more than two months. This suggests that the finalized Korean deal may be more detailed than Japan's. With the details still unresolved, U. S. tariffs on Korean cars remain at 25%. This puts Korean automakers at a disadvantage compared to Japanese rivals, who now face levies of just 15%.South Korea has long enjoyed zero tariffs on auto exports to the U. S. under a free trade agreement. But now, it risks losing that edge. Japan previously faced a 2. 5% tariff, meaning Korea had a relative advantage. This advantage would disappear if both countries are subjected to the same 15% rate under the new framework. The finance minister said that Seoul has repeatedly raised this disadvantage with Trump and other U. S. officials. But Washington hasn't been particularly receptive on that point. Korean negotiators will continue to press their case. The concerns over the currency impact of the investment pledge come at a time of weakness in the won. The currency hit its weakest against the dollar since 2009 in April. After a short-lived rally, it has started to weaken again. The finance minister said that much of the recent depreciation reflects market concern that the deal hasn't been finalized. Once the tariff issue is resolved, that uncertainty will likely fade. Despite earlier speculation that the U. S. might object to the currency's decline, Treasury officials have expressed no concern on that front. The government is also accelerating plans to launch 24-hour trading of the won. This would enhance market access and reduce the so-called Korea discount on equities. It's also a key prerequisite for MSCI Developed Market inclusion. Technical preparations are already underway, and the goal is to implement the new system as quickly as possible. Beyond trade and currency, the broader economic strategy of South Korea hinges on building an innovation-driven economy. The government is channeling resources into artificial intelligence, digital transformation, and deep-tech sectors. This is to address structural challenges such as population aging, a declining birth rate, and rising debt-to-GDP levels. The finance minister said that the government's 58% debt projection represents a worst-case scenario. This assumes that most of its targeted investments fail. But even partial success, say 10% of its innovation projects, could yield high-bandwidth memory-level breakthroughs. These could boost productivity, expand economic growth, and improve fiscal stability.