Trade negotiations between South Korea and the U.S. have stalled over foreign exchange concerns, prompting Seoul to seek Washington's help in minimizing the potential market impact of a $350 billion investment package.
Delay in US-South Korea Trade Deal Due To Currency Risks
A senior official from the South Korean presidential office revealed on Tuesday that the finalization of the U.S.-South Korea trade deal is being delayed by foreign exchange concerns, reported Reuters. The official, Presidential Policy Secretary Kim Yong-beom, emphasized the need to address the impact of the investment package on the domestic dollar-won exchange market.
Kim pointed out that South Korea’s situation differs from Japan’s, which recently signed a trade deal with the U.S. that includes a $550 billion investment package. “While there is not much difference in trade surpluses, the size of the economy, more importantly foreign exchange market conditions are very different,” stated Kim.
South Korea faces greater currency risks than Japan regarding its $350 billion U.S. investment, as the won lacks the yen's international status and Japan's larger foreign exchange reserves and swap programs.
Markets expect the investment to exert long-term downward pressure on the won, especially given that $350 billion far exceeds the $20–30 billion annual capacity of state-run policy banks.
Trade Deal Delay Clouds Shipbuilding Plans
The delay in finalizing the trade deal comes despite an agreement reached in July, which includes a $350 billion investment package for the U.S. South Korea and the U.S. had agreed to include currency policy in their discussions, a matter that will be addressed in the final agreement.
The trade negotiations between South Korea and the U.S. have been a significant point of discussion in recent months. South Korean President Lee Jae Myung had pledged to revitalize the U.S. shipbuilding industry during his official visit to the U.S. in August. This commitment was seen as a potential catalyst for the trade negotiations between the two countries.
Meanwhile, President Donald Trump is also set to attend the Asia-Pacific Economic Cooperation summit in South Korea in late October, a trip that could pave the way for crucial meetings with Chinese President Xi Jinping amid the ongoing trade tensions.
READ NEXT:
Image via Shutterstock
Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.
