President Donald Trump\u2019s demand that Seoul hand over $350 billion in cash could devastate South Korea\u2019s financial markets and economy.<\/p>\n
In July, Korea agreed to invest $350 billion in the U.S., in exchange for Washington setting a 15% tariff rate. But not all the details were spelled out at the time, and both sides have been in negotiations to finalize the deal, with tensions ramping up lately.<\/p>\n
Commerce Secretary Howard Lutnick has insisted Korea abide by terms similar to what Japan accepted, including the transfer of cash soon after investment projects get U.S. approval.<\/p>\n
But earlier this month, President Lee Jae-myung told Reuters<\/a> such requirements would trigger a calamity similar to the one that eventually required an International Monetary Fund bailout.<\/p>\n \u201cWithout a currency swap, if we were to withdraw $350 billion in the manner that the U.S. is demanding and to invest this all in cash in the U.S., South Korea would face a situation as it had in the 1997 financial crisis,\u201d he said.\u00a0<\/p>\n That\u2019s because Korea has\u00a0foreign exchange reserves of $410 billion, and its currency isn\u2019t a mainstay on global financial markets like Japan\u2019s yen, meaning a sudden transfer of $350 billion in cash to the U.S. would send the won into a tailspin.<\/p>\n A swap line between the Bank of Korea and the Federal Reserve would provide Seoul with dollar liquidity that would help avoid jolting foreign-exchange markets.<\/p>\n Korea has also pointed to major differences with Japan and why the terms of Tokyo\u2019s $550 billion investment pledge shouldn\u2019t be applied in the same way. For instance, Japan has more than triple Korea\u2019s currency reserves at $1.3 trillion. The yen is also a much more international currency, accounting for 17% global market share versus just 2% for the won.<\/p>\n But Lee\u2019s warning didn\u2019t sway Trump, who said on Thursday Korea must pay the money \u201cupfront.\u201d Over the weekend, Korea\u2019s national security advisor reiterated<\/a> the inability to meet U.S. demands.<\/p>\n \u201cOur position is not a negotiating tactic. It is objectively and realistically not a level we are able to handle,\u201d Wi Sung-lac said in an interview with Korean media. \u201cWe are not able to pay $350 billion in cash.\u201d<\/p>\n Trump\u2019s hard-line stance on the trade deal adds further strain to bilateral ties after U.S. immigration agents raided a Hyundai plant<\/a> in Georgia earlier this month and arrested hundreds of Korean workers who were helping get the factory ready for production.<\/p>\n Trump has since said he didn\u2019t want the raid to \u201cfrighten off\u201d foreign investment<\/a> in the U.S., and a State Department official expressed regret<\/a> over the detention of the workers.<\/p>\n Still, people in Korea were outraged, especially as the raid came days after Lee met Trump at the White House and appeared to have a successful visit. For his part, Lee didn\u2019t blame Trump.<\/p>\n \u201cI do not believe this was intentional, and the U.S. has apologized for this incident, and we have agreed to seek reasonable measures in this regard, and we are working on them,\u201d he\u00a0told Reuters.<\/p>\n","protected":false},"excerpt":{"rendered":"President Donald Trump\u2019s demand that Seoul hand over $350 billion in cash could devastate South Korea\u2019s financial markets…\n","protected":false},"author":2,"featured_media":25389,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[457],"tags":[6221,74,337,864,33,327],"class_list":["post-25388","post","type-post","status-publish","format-standard","has-post-thumbnail","category-korea-exchange","tag-currency","tag-donald-trump","tag-korea-exchange","tag-krx","tag-south-korea","tag-tariffs"],"_links":{"self":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/25388","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/comments?post=25388"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/posts\/25388\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media\/25389"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/media?parent=25388"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/categories?post=25388"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/korea\/wp-json\/wp\/v2\/tags?post=25388"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}