Excessive U.S. pressure on investment calls for caution

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Excessive U.S. pressure on investment calls for caution

Published: 15 Sep. 2025, 00:00

Audio report: written by reporters, read by AI

U.S. Commerce Secretary Howard Lutnick speaks next to U.S. President Donald Trump, as they make an announcement about an investment from Taiwan Semiconductor Manufacturing Company (TSMC), in the Roosevelt Room at the White House in Washington on March 3. [REUTERS/YONHAP]

Talks over tariffs between Korea and the United States remain stalled, with little sign of a breakthrough. At the center is a dispute over Korea’s $350 billion investment pledge. Seoul is seeking to count policy bank loans and guarantees toward the commitment to reduce the burden of direct investment, while Washington is pressing for a larger share in cash contributions.

U.S. Commerce Secretary Howard Lutnick escalated the standoff on Thursday, warning that unless Korea accepts the Japanese model, it will face a 25 percent tariff. The U.S.–Japan deal has been criticized at home as a lopsided agreement, even likened to handing Washington a blank check. Under the deal, Japan must invest $550 billion during President Donald Trump’s term, with Washington determining where funds go. Once a project is approved, Tokyo has 45 days to wire the money. Profits are shared evenly until the principal is recovered, after which the United States takes 90 percent. If Tokyo refuses, tariffs rise again.

Measured against Korea’s economic size, such demands are excessive. Korea’s U.S. investment pledge amounts to 72 percent of its national budget this year. Japan’s pledge equals 13.1 percent of its GDP, while Korea’s ratio is 17.5 percent. Japan also has more than triple Korea’s foreign reserves and enjoys the privileges of a reserve currency through the yen and an unlimited swap line with the United States.

Seoul calculated that even if burdensome, its pledge could be met through private investment, government-backed loans, and long-term financing. But if it were forced to adopt the Japanese model, Korea would end up committing 84 percent of its foreign reserves — $416.3 billion — to U.S. projects, raising serious concerns over liquidity. No nation can afford to sacrifice its financial foundation for investment pledges.

The pressure is already visible. From Sept. 16, U.S. tariffs on Japanese cars will fall to 15 percent, leaving Korean exporters at a disadvantage. The situation is urgent, but signing hastily would be reckless. Negotiations must proceed with composure, minimizing corporate damage while protecting national interests.

Japan’s decision to include a safeguard clause in its treaty — that investments cannot contradict domestic laws — offers a model worth considering. At his 100-day press conference, President Lee Jae Myung reaffirmed that he would not accept terms outside reason and fairness. Korea must persuade Washington of its role as a partner in revitalizing U.S. manufacturing while securing an agreement that aligns with its own national interest.

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.