South Korea has warned that its trade deal with the U.S. is in jeopardy as the two sides remain gridlocked in a dispute over how to allocate a $350 billion investment. In July, the two sides agreed to a trade deal that would see South Korean goods taxed at 15% and the country committing $350 billion to the U.S. for shipbuilding and other programs.
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“Without an agreement, it will be difficult for the (shipbuilding) project to even get off the ground,” said Kim Yong-beom, director of national policy in the presidential office. The U.S. seeks to structure South Korea’s $350 billion investment in a similar fashion as its deal with Japan, although Kim emphasized that the financial “circumstances facing South Korea and Japan are fundamentally different.”
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For South Korea, the issue is how it will obtain the $350 billion. Last month, Kim said that the capital would mainly be in the form of loan guarantees instead of direct injections. Withdrawing this sum of capital directly could have detrimental effects on the foreign exchange market and deal “too great a shock to our entire economy,” he said.
Tensions between the two countries further escalated following an ICE raid at a Hyundai plant in Georgia last week that led to the arrests of hundreds of South Korean workers.
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