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Korea-U.S. investment deal imminent as reps race to fine-tune details ahead of APEC

Published: 18 Oct. 2025, 12:14

Deputy Prime Minister and Finance Minister Koo Yun-cheol, right, and U.S. Treasury Secretary Scott Bessent, left, meet on the sidelines of the International Monetary Fund (IMF) and World Bank (WB) Annual Meetings in Washington on Oct. 15. [YONHAP]

The Korean government has entered final negotiations with the United States over a $350 billion investment package, amid ongoing concerns about how it will be financed.

Deputy Prime Minister and Finance Minister Koo Yun-cheol met with U.S. Treasury Secretary Scott Bessent on Wednesday, on the sidelines of the International Monetary Fund and World Bank Annual Meetings. The following day, Industry Minister Kim Jung-kwan and presidential director of national policy Kim Yong-beom held a two-hour meeting with U.S. Secretary of Commerce Howard Lutnick.

The negotiations had previously stalled over differences regarding the structure of the investment, but the atmosphere has shifted recently after the United States responded “meaningfully” to Korea’s revised proposals and offered new suggestions in return.

Kim Yong-beom, who met with Lutnick — considered a key figure in the negotiations on the U.S. side — said after the meeting, “We had a full two-hour discussion,” but did not elaborate further.

The discussions reportedly focused on three key issues: the structure of Korea’s $350 billion investment regarding cash versus guarantees, the commercial logic behind the investment distribution and the scope of a potential currency swap between the two countries.

The United States has been pressing for an upfront, cash-based investment. In response, Koo expressed concern to Bessent that such a structure could destabilize Korea’s foreign exchange market.

“Washington is asking for rapid upfront payments, but given our foreign exchange situation, that’s difficult,” said Koo. “Secretary Bessent understood this and said he would explain it internally.”

Industry Minister Kim Jung-kwan, right, and presidential director of national policy Kim Yong-beom vist the White House Office of Management and Budget in Washington on Oct. 16. [YONHAP]

Korea is advocating for a structure centered on guarantees and loans, rather than cash, citing concerns about exchange rate volatility and fiscal strain.

To that end, Seoul has proposed alternatives such as a capital call structure and staggering payments over multiple years. U.S. officials have reportedly responded positively to these suggestions.

Under a capital call system, funds are not disbursed all at once but are drawn as needed within a pledged limit. This would ease the burden of raising the full $350 billion in a lump sum.

“Washington is pushing hard for full upfront payment,” said one diplomatic source. “Korea wants to stretch the timeline or split the payments to mitigate the pressure on its currency market. With U.S. President Donald Trump placing political emphasis on ‘upfront,’ a compromise at the working level is crucial.”

“The working-level officials understand our concerns, but it’s unclear whether Trump can be persuaded to accept this structure,” said Koo.

Deputy Prime Minister and Finance Minister Koo Yun-cheol speaks to reporters in Washington on Oct. 16. [YONHAP]

Korea has long maintained that an unlimited currency swap with the United States would be a necessary safety mechanism in any deal, since an outflow of $350 billion — about 83 percent of Korea’s $422 billion in foreign reserves — could trigger currency instability or even a crisis.

Still, the government said the swap is not the top agenda item in the talks. It will only be seriously discussed once the investment structure is finalized.

“When the structure is finalized, we’ll calculate the foreign exchange requirements accordingly,” Koo said. “Because we’ve made it clear that an upfront cash investment isn’t viable, the need for a swap will depend on what alternative structure is agreed upon.”

“Reducing the total investment is unlikely, so a realistic solution would be to clarify where the funds will go, how profits will be split and to set annual limits for phased disbursement,” said one trade expert on the condition of anonymity.

There is speculation that Korea and the United States may be discussing a 10-year disbursement schedule with investments sourced in Korean won.

Containers for export are seen piled up at a port in Pyeongtaek, Gyeonggi on Oct. 16. [NEWS1]

“Given the scale of Korea’s currency market, an annual outflow of $15 billion to $20 billion is likely the maximum to avoid shocks,” said a former high-ranking finance official said. A 10-year disbursement plan, the official noted, would be more sustainable.

However, Koo dismissed this idea, saying, “This is the first time I've heard of this.”

Disagreements remain over where the funds will be directed and how profits will be divided. The United States wants to control the fund and shape the profit structure in its favor.

In a similar deal with Japan, Washington reportedly agreed to a 50-50 split on returns until the initial investment is recouped, after which the ratio shifts to 90 percent for the U.S. and 10 percent for Japan.

U.S. Commerce Secretary Howard Lutnick listens as U.S. President Donald Trump speaks in the Oval Office of the White House in Washington on Oct. 16. [AP/YONHAP]

“The government should identify sectors where Korean firms excel, have them raise the dollars directly and invest accordingly,” said Park Sung-hoon, emeritus professor of international trade policy at Korea University. “This would reduce Korea’s foreign exchange burden. It’s not realistic to pay $350 billion in cash. Instead, Korea should pursue a long-term plan that genuinely contributes to U.S. industrial revival.”

The next round of negotiations has yet to be scheduled. With the APEC Economic Leaders’ Meeting less than two weeks away — and a Korea-U. S. summit likely on the sidelines — this week’s trip to Washington is seen as the final opportunity for face-to-face talks.

“This time, the terms, structure and timeline must be clearly documented,” said Lee Jae-min, a professor of international law at Seoul National University School of Law. “That’s the only way to avoid legal and policy disputes later.”

Meanwhile, on their first day in Washington, Kim Jung-kwan and Kim Yong-beom met with Russell Vought, director of the White House Office of Management and Budget, for 50 minutes. The two sides reportedly discussed plans for MASGA (Make American Shipbuilding Great Again), a bilateral shipbuilding cooperation project.

“We had constructive discussions on MASGA,” Kim Jung-kwan said afterward.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM WON [[email protected]]