The South Korean government has denied US President Donald Trump's claims that it will give $350 billion in cash as part of a tariff reduction agreement. According to officials, the pledge consisted of loans, guarantees, and equity rather than cash.
This explanation is provided following Trump’s claim that Seoul had agreed to pay out the full amount. The South Korean advisers cautioned that this cash outflow would cause financial instability and bring the economy into crisis. The government emphasized that the agreement should be realistic to ensure domestic stability.
Seoul's national security advisor, Wi Sung-lac, said the nation could not pay such a sum in cash. He termed the position a realistic evaluation and not a bargaining strategy. In his opinion, the country should avoid taking financial risks, such as liquidity shortages.
Analysts observe that South Korea's $410 billion foreign exchange reserve is a protector but not sufficient to finance one cash outflow of this scale. According to officials, any settlement must include some form of protection, like structured funding or currency swaps, instead of transfers.
The dispute has slowed the process of formalizing the trade deal that was achieved in July. That initial handshake was aimed at lowering the US tariffs on South Korean products from 25% to 15%. Seoul, in its turn, promised to invest $350 billion in projects in the United States on condition that the funds would be sent as structured financing, not as direct cash.
The negotiations are on a standstill because Washington wants upfront delivery, and Seoul wants flexibility in dealing with the promises. South Korean leaders insist that they can gather the money through loans and guarantees, but they do not wish the pledged money to be controlled by the US.
The problem is likely to play a leading role at the Asia-Pacific Economic Cooperation (APEC) summit next month in Seoul, where Trump will be in attendance. Coupled with South Korea, Trump also mentioned a deal with Japan worth $550 billion, which added to further questioning the trade ambitions of Washington in Asia.