$20 billion annual ceiling averts market strain, turning tariff talks into long-term platform for industrial cooperation

The U.S. and South Korea agreed on the detailed contents of their tariff and investment negotiations following Wednesday’s bilateral summit in Gyeongju, refining a framework first agreed in late July. Presidential Chief of Staff for Policy Kim Yong-beom said Seoul will invest $200 billion in cash out of a $350 billion U.S. investment package, but with an annual ceiling of $20 billion to limit volatility in foreign exchange markets. The remaining $150 billion will be directed toward shipbuilding cooperation (MASGA) led by South Korean companies. Tariffs on South Korean automobiles and parts will fall from 25% to 15%, while reciprocal tariffs already reduced to 15% in July will remain in effect.

Kim said funds will be raised through returns on South Korea’s foreign-currency assets and offshore bond issuance by state-run banks, avoiding pressure on the domestic FX market, with Seoul able to request timing and size adjustments if instability is likely. He also said that the memorandum of understanding text is nearly finalized but will require legislation before implementation, with tariff reductions to apply retroactively from the first day of the month in which the bill is submitted to the National Assembly. Only commercially viable projects guaranteeing principal and interest repayment will proceed, he said, under an umbrella Segregated Portfolio Company structure, with profits shared equally between Washington and Seoul until full repayment and subject to adjustment if repayment within 20 years proves unlikely.

The U.S. and South Korea agreed on the detailed contents of their tariff and investment negotiations following Wednesday’s bilateral summit in Gyeongju, refining a framework first agreed in late July. Presidential Chief of Staff for Policy Kim Yong-beom said Seoul will invest $200 billion in cash out of a $350 billion U.S. investment package, but with an annual ceiling of $20 billion to limit volatility in foreign exchange markets. The remaining $150 billion will be directed toward shipbuilding cooperation (MASGA) led by South Korean companies. Tariffs on South Korean automobiles and parts will fall from 25% to 15%, while reciprocal tariffs already reduced to 15% in July will remain in effect.

Kim said funds will be raised through returns on South Korea’s foreign-currency assets and offshore bond issuance by state-run banks, avoiding pressure on the domestic FX market, with Seoul able to request timing and size adjustments if instability is likely. He also said that the memorandum of understanding text is nearly finalized but will require legislation before implementation, with tariff reductions to apply retroactively from the first day of the month in which the bill is submitted to the National Assembly. Only commercially viable projects guaranteeing principal and interest repayment will proceed, he said, under an umbrella Segregated Portfolio Company structure, with profits shared equally between Washington and Seoul until full repayment and subject to adjustment if repayment within 20 years proves unlikely.

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