South Korean President Lee Jae Myung has warned that his country could face a severe financial crisis similar to the 1997 Asian financial crisis if it meets President Donald Trump’s investment demands without proper safeguards. The warning comes as both countries struggle to finalize a trade agreement that was first outlined in July 2025.
The two nations reached a framework deal in July where the United States agreed to reduce tariffs on South Korean goods from 25 percent to 15 percent. In exchange, South Korea committed to investing $350 billion in American projects chosen by Trump, along with purchasing $100 billion in liquefied natural gas and other energy products. However, negotiations have stalled over how these massive investments would be structured and managed.
“Without a currency swap, if we were to withdraw $350 billion in the manner that the U.S. is demanding and to invest this all in cash in the U.S., South Korea would face a situation as it had in the 1997 financial crisis,” Lee told Reuters through a translator. The president emphasized that reaching agreements that guarantee commercial viability remains both the central task and the biggest obstacle in current negotiations.
Recent tensions complicate investment discussions
The investment talks have become more complicated following a controversial immigration raid in September 2025. More than 300 South Korean workers were arrested at a Hyundai Motor battery plant construction site in Georgia, with federal officials accusing them of immigration violations. The Trump administration published images of the workers in handcuffs, which Lee said naturally angered South Koreans and could discourage companies from investing in the United States.
“South Korea simply cannot invest $350 billion in the US like Trump demands”
— S.L. Kanthan (@Kanthan2030) September 22, 2025
— Korean President Lee Jae Myung.
“It will lead to a currency crisis like in the 1990s. Such an investment would require at least a currency swap agreement.”
Trump is so illiterate in economics.pic.twitter.com/qqAP9CDnSj
Lee stressed that South Korea’s situation differs significantly from Japan, which struck a similar trade deal with the United States in July. Japan has more than double South Korea’s $410 billion in foreign exchange reserves and maintains a currency swap arrangement with the United States. “I do not believe this was intentional, and the U.S. has apologized for this incident, and we have agreed to seek reasonable measures in this regard and we are working on them,” Lee said about the Georgia raid.
South Korea has proposed establishing a foreign exchange swap line with the United States to reduce the shock of such large investments on the local market for the Korean won currency. The 1997 Asian financial crisis devastated South Korea’s economy, forcing the country to accept a bailout from the International Monetary Fund and leading to widespread corporate bankruptcies and mass unemployment.
Commerce Secretary Howard Lutnick has said South Korea should follow Japan’s example, telling the country it either needs to accept the deal or pay the tariffs. When asked if he would walk away from negotiations, Lee responded: “I believe that between blood allies, we will be able to maintain the minimum amount of rationality.” The South Korean president hopes to conclude these talks before the end of 2025, saying “We should end this unstable situation as soon as possible.” The ongoing trade tensions reflect broader concerns about Trump’s aggressive tariff policies affecting America’s closest allies in Asia.
