US, South Korea talks lose steam over $350B investment fund disagreement

The U.S. and South Korea are in a stalemate over a $350 billion investment fund, which both countries made in the wake of the heightened U.S. trade policies. Kim Yong-beom, South Korea’s director of national policy, also warned that even the shipbuilding agreement is at risk if both parties fail to narrow the differences.

Yong-beom said that on Tuesday, Seoul told U.S. officials multiple times that it could not accept terms similar to Japan’s $550 billion investment pledge finalized last week. He pointed out that the two economies are different in size and might have potential repercussions on the foreign exchange market.

Seoul seems more concerned about how to secure and manage the fund

Kim noted that the U.S. had issued South Korea a draft similar to the one Japan accepted and maintained that the country could not agree to those terms. He also believes it’s important to determine the party making the fund’s investment decisions and the profit-sharing mechanism.

According to him, South Korea is more concerned about securing and managing $350 billion from the foreign exchange market.

The director of Seoul’s national policy also stated that it will be difficult to set in motion the Make Shipbuilding Great Again (MASGA) project. The project is aimed at reviving the U.S. shipbuilding industry. 

“The circumstances facing South Korea and Japan are fundamentally different.”

-Kim Yong-beom, Director of National Policy at South Korea.

President Donald Trump signed an executive order on September 5 applying a baseline 15% tariff on Japanese imports to the U.S. Japan also agreed on a $550 billion investment in the U.S. to be invested in specific projects in the country. The initiative is meant to strengthen U.S. national and economic security.

Japan and the U.S. struck the deal in July but stalled it for weeks as Washington and Tokyo haggled over terms. According to a memorandum of understanding detailing the funding pledge, the U.S. threatened to hike levies on Japanese imports if the country doesn’t fund Trump’s selected investments.

Washington is yet to strike a deal on lower auto tariffs for South Korea as agreed. Both nations have also been in talks to follow up on their July agreement. The U.S. and South Korea agreed to the $350 billion fund as part of a trade deal to maintain 15% levies on imports from Seoul. 

Kim believes the auto industry and lowering tariff differences are important. He said Seoul cannot rush to agree on $350 billion just to secure a tariff deduction in the auto sector because it could shock the country’s entire economy.

U.S. detains hundreds of South Korean workers

The deadlock also comes as 300 South Koreans were detained after a U.S. immigration raid on a Hyundai Motor Group-LG Energy Solution battery plant in the state of Georgia, raising tensions between the two nations. The raid is considered a move that could make Korean companies more reluctant to invest in the U.S. despite being encouraged to do so as part of the trade agreement.

Seoul’s flagship carrier, Korean Air, has agreed to dispatch a chartered plane on Wednesday to return the detained workers. The company’s spokesperson said the airline will operate a charter flight to Atlanta tomorrow using a Boeing 747-8i.

South Korean Minister of Foreign Affairs, Cho Hyun, went to Washington on Monday to seek assurances from U.S. officials that the workers will not face multi-year bans from re-entry to the U.S. Trump called for foreign companies to respect U.S. immigration laws and asked to hire and train American workers in return.

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