South Korea Says It Is Not Wealthy Enough to Satisfy U.S. Demands
South Korea’s President Lee Jae-Myung warned that meeting Washington’s $350 billion investment demand without protections could trigger a financial crisis as severe as 1997.
In July, Seoul and Washington agreed verbally that the U.S. would cut tariffs on Korean exports if Korea parked $350 billion in American assets. They have not finalized details on how to safeguard Korea’s reserves.
Korea held about $416 billion in foreign currency reserves at the end of August. Lee explained that shifting $350 billion into U.S. markets without a currency‐swap line would drain Korea’s liquidity and spark sharp won depreciation.
In 1997, Korea’s reserves fell from $30 billion to $4 billion, debt surged to $153 billion, and the country sought an IMF bailout after its fixed‐rate defense collapsed.
Today’s Korean firms still carry heavy dollar debt and depend on short‐term funding. A sudden outflow could raise borrowing costs, weaken the won, and shake investor confidence.
Seoul proposes a U.S.–Korea swap line, as used in 2008 and 2020, to secure dollar funding. Washington, however, pushes for direct Korean cash investments in chosen projects.
Lee also condemned U.S. immigration raids that detained over 300 Korean workers at a Hyundai plant in Georgia. He called the tactics “harsh” and warned they might deter Korean firms from U.S. investments.
This standoff comes as Lee attends the U.N. General Assembly and chairs a Security Council session—historic firsts for a Korean president. Since taking office in June, Lee has moved to steady Korea’s economy and recalibrate ties with major powers.
He met former President Trump in August, forging a personal rapport but no formal pact. A financial shock in South Korea, the world’s tenth-largest economy, would ripple through global supply chains and markets.
It would also strain the U.S.–Korea security alliance at a tense moment on the peninsula. Lee insists on clear safeguards to preserve Korea’s economic sovereignty and prevent past mistakes. As both capitals negotiate, the world watches whether they can balance strategic partnership with fiscal prudence.
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