The mega investment demanded by the United States (US) seems to be unable to be met by South Korea in trade talks between Seoul and Washington that took place last week.
South Korean President Lee Jae-Myung said that the US investment demand of $350 billion could trigger a financial crisis for his country if implemented without adequate safeguards.
Lee explained that transferring so much capital in cash to the US would put pressure on financial markets in Korea, similar to the 1997 Asian financial crisis, unless there was a currency swap to help absorb the shock.
South Korea has proposed a currency swap mechanism with the US as one way out, but it is still unclear whether the US would agree to it or whether it would be sufficient to address the financial risks mentioned.
Lee also said that although there was verbal agreement in the negotiations that the investment project must be commercially reasonable.
Many technical details and implementation details remain the biggest obstacles to a final solution.
These developments have raised concerns that economic ties between South Korea and the US, while important to both countries, could face significant strain if a practical compromise is not reached.
This includes negative impacts on the value of the won, foreign investment and the stability of domestic financial markets.
