US-Korea Trade Tensions Escalate as Trump Demands $350 Billion Investment Deal with Controversial Profit-Sharing Terms

Listeners, welcome to the South Korea Tariff News and Tracker for Friday, September 26, 2025. The big news dominating the headlines this week is the major standoff between South Korea and the United States over tariffs and a proposed investment agreement. President Donald Trump has publicly demanded that South Korea match Japan’s commitment by pledging an enormous $350 billion up front for U.S. investment projects. The Wall Street Journal and other outlets confirm that Washington wants this funding to be provided largely in cash, aiming for parity with Tokyo’s $550 billion “blank check” deal concluded back in July. Tokyo’s deal not only delivered mostly cash, but also gave the U.S. effective control over investment decisions, with profits split 50-50 until principal is recovered, then shifting to 90 percent in America’s favor. South Korea’s negotiators are pushing back hard, saying that such demands, especially the upfront cash payment, could destabilize the Korean won and seriously deplete the country’s foreign exchange reserves. The $350 billion Trump is requesting amounts to about 84 percent of Korea’s total reserves, and President Lee Jae Myung has warned that granting the U.S. demands without a robust safety net could push Korea into a crisis similar to the 1997 Asian financial meltdown. Korean policymakers are insisting the U.S. agree to an unlimited currency swap line—a mechanism allowing central banks to exchange currencies freely—in order to provide a crucial buffer. Kim Yong-beom, Korea’s director of national policy, stated this week that the unlimited swap is “the minimum requirement.” According to Reuters' reporting, internal analysis at Citigroup suggests the U.S. Federal Reserve is unlikely to agree, raising further uncertainty. Washington, for its part, has offered Korea the possibility of accessing the Federal Reserve’s FIMA repo facility instead—a measure introduced in 2020 that allows foreign central banks to swap U.S. Treasuries for short-term dollar loans. However, this is seen in Seoul as a far less substantial safety net compared to an unlimited swap line. Another sticking point is profit-sharing: Trump’s team is demanding a lopsided split, with 90 percent of profits going to the U.S. after the principal is repaid. Seoul is objecting, arguing for terms closer to economic parity—ideally, a 90-10 split in Korea’s favor during the repayment phase. South Korea is also requesting U.S. government guarantees for the investments to limit risk exposure, a demand that has so far received little traction. For some context, as these negotiations stall, the U.S. has already begun rolling back tariffs for Japan and the EU: auto duties have dropped from 25 percent to 15 percent. This puts Korean automakers at a potential disadvantage if a U.S.-Korea deal isn’t reached soon. According to the Korea JoongAng Daily, market anxiety is growing, with the Kospi falling sharply as talks drag on. South Korea’s Prime Minister Kim Min-seok has a This content was created in partnership and with the help of Artificial Intelligence AI.