President Lee Jae Myung has issued a grave warning that South Korea could face a financial crisis similar to the 1997 Asian financial meltdown if it accepts the United States' investment demands without proper safeguards. In an interview with Reuters ahead of his trip to the United Nations General Assembly in New York, Lee emphasized the importance of protective financial mechanisms, such as a currency swap arrangement, to mitigate potential risks.

The $350 Billion Investment Pledge

In July, South Korea and the United States reached a framework agreement in which Seoul committed to a $350 billion investment in the U.S. in exchange for a reduction in U.S. tariffs on Korean goods. President Lee highlighted that such a substantial investment could destabilize South Korea's economy if executed without proper financial safeguards. He noted that previous currency swap arrangements between the two nations had occurred during the 2008 global financial crisis and the 2020 COVID-19 pandemic, demonstrating the importance of these mechanisms during periods of economic uncertainty.

Comparing South Korea and Japan's Economic Situations

President Lee compared South Korea to Japan, observing that Japan's $550 billion investment deal with the U.S. was more feasible due to its larger foreign exchange reserves and the global standing of the yen. In contrast, South Korea's foreign exchange reserves are approximately $410 billion, and the Korean won lacks similar international status, making the proposed investment package more challenging to manage without additional financial support.

Commercial Viability and Ongoing Negotiations

Both nations agreed that any investment projects must be commercially viable, but President Lee acknowledged the complexities involved in finalizing the details. He stressed the urgency of resolving these issues promptly to prevent prolonged economic instability. The ongoing negotiations aim to ensure that the investment commitments are sustainable and beneficial for both countries.

Impact of Recent U.S. Actions on Bilateral Relations

The arrest of over 300 South Korean workers at a battery factory construction site in Georgia by U.S. immigration authorities has added tension to bilateral relations. President Lee condemned the actions, which sparked public outrage in South Korea, but reassured that such incidents would not undermine the broader alliance between the two nations. He emphasized the importance of maintaining strong diplomatic and economic ties despite these challenges.

The Path Forward

President Lee's administration remains committed to finalizing the trade deal with the United States while insisting on safeguards to protect South Korea's financial stability. The government is actively seeking solutions that balance the benefits of increased investment with the need for economic security. As negotiations continue, the focus remains on achieving a mutually beneficial agreement that supports long-term economic growth and strengthens the bilateral relationship between South Korea and the United States.