Korea Won’t Pay $350B Upfront for U.S. Tariff Deal

Intermediate | September 28, 2025

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A Bold Demand, A Hesitant Response

In July 2025, the U.S. and South Korea reached a handshake agreement: the U.S. would cut tariffs on South Korean goods from 25% to 15%, in exchange for $350 billion in investment from Seoul into U.S. projects. (Reuters) But now, South Korea says it cannot make that payment upfront in cash, as President Donald Trump apparently expects. (Reuters)

Korea’s National Security Adviser Wi Sung‑lac said, “It is objectively and realistically not a level we are able to handle.” (Reuters) Instead, Seoul proposes structuring the investment via loans, guarantees, and equity, not immediate cash payment. This clash over terms is central to the Korea won’t pay $350B upfront dispute.

Why Korea Says No to Cash Upfront

Seoul argues that an upfront $350 billion payment could destabilize its economy. The country holds around $410 billion in foreign reserves, and leaders warn that an unprotected, large outlay could echo the 1997 financial crisis. (Reuters)

Control Over Funds and the Korea Won’t Pay $350B Upfront Dispute

Another point of tension: who controls and manages the funds. Washington wants control over how the investments are used; Korea wants safeguards like a currency swap backing to avoid currency risk. (FT) This issue highlights why the Korea won’t pay $350B upfront position has become so central to negotiations.

Markets Feel the Strain

Uncertainty in the deal is already pushing the Korean won downward — it recently crossed 1,400 won per U.S. dollar, a psychological threshold. (Reuters) Analysts warn that without clarity, the won could fall further, possibly to 1,450. (Reuters)

Economic Impact

This currency weakness could make imports more expensive, squeeze margins for exporters, and weaken investor confidence in Korea’s economic outlook.

What Korea Proposes Instead

South Korea is negotiating a non‑binding memorandum of understanding (MOU) to outline how funds would flow — emphasizing loans, guarantees, and equity over upfront cash. (Reuters) Up to $150 billion might go toward strategic industries like semiconductors, batteries, AI, and pharmaceuticals. (Reuters)

Demands for Protection

Korea also insists on profit-sharing rules and protections so that the U.S. can’t take an outsized share of returns. (Reuters)

What’s Next? Stakes, Risks & Warnings

If South Korea refuses heavy cash payments, the U.S. could reinstate higher tariffs or reframe deal terms more aggressively. Trump’s negotiators have reportedly pushed Korea to increase guarantees or direct cash flow. (WSJ)

Risks for Korea

For Korea, the risk is economic: currency devaluation, capital outflows, pressure on public finances, and political backlash at home. President Lee Jae Myung’s administration must balance national sovereignty with maintaining trade access to its largest partner.

Possible Outcome

If talks fail, South Korea might accept the 25% tariffs rather than make a dangerous deal on unfavorable terms. This unresolved dispute keeps the spotlight on the Korea won’t pay $350B upfront issue. (FT))

Vocabulary

Handshake agreement (noun) – an informal deal made by trust rather than legal contract.
Example: “The July handshake agreement is now under strain.”
Upfront (adverb / adjective) – done in advance or at the start.
Example: “Korea refuses to pay $350 billion upfront.”
Equity (noun) – ownership stake in a business or asset.
Example: “Some of the investment could come in the form of equity.”
Guarantee (noun / verb) – a promise to fulfill an obligation or back something.
Example: “They propose using guarantees instead of cash.”
Safeguard (noun) – a protective measure.
Example: “Korea demands safeguards like a currency swap.”
Currency swap (noun) – agreement to exchange currencies under specific terms.
Example: “A currency swap protects against exchange risk.”
Impass (noun) – a situation where no progress is possible.
Example: “Negotiations have reached an impasse.”
Outlay (noun) – an amount of money spent.
Example: “An unprotected large outlay could destabilize Korea’s economy.”
Capital outflow (noun) – movement of money out of a country’s economy.
Example: “Market fears may trigger capital outflow from Korea.”
Reinstate (verb) – restore something to a previous state.
Example: “The U.S. might reinstate higher tariffs if no deal is reached.”

Discussion Questions (About the Article)

What was the original deal between the U.S. and South Korea in July 2025?
Why does South Korea reject an upfront $350 billion cash payment?
What are the economic risks for Korea if it accepts unfavorable terms?
How might currency fluctuations affect this deal?
What could happen if the deal collapses and higher tariffs return?

Discussion Questions (About the Topic)

When is it reasonable for one country to demand large investments from another in trade deals?
How do you balance national economic sovereignty with global trade pressures?
What role should safeguards (like a currency swap) play in international deals?
How much influence should the investing country have over how money is used?
Have you seen examples where large foreign investment deals risked destabilizing local economies?

Related Idiom / Phrase

“Between a rock and a hard place” – facing two unpleasant choices.
Example: “Korea is between a rock and a hard place: accept risky terms or face damaging tariffs.”

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This article was inspired by Reuters. (Reuters)