Trump claimsKorea has to pay first. $35 billion in advance payments.
The South Korean President responded: This could trigger a new round of financial crisis.
“Prepaid” three words, who is angry
Trump stood on the speech table, speaking full of words, saying South Korea agreed to pay to the United States 35 billionDollars, and it has to be paid in advance.
This "prepaid" word, once out, the media instantly burst the pot.
The White House official did not further explain the legal meaning of "pre-payment."Investment plans are still being talked about, the money has not been paid, the contract has not been signed, and suddenly South Korea has promised, the money has to be tackled in advance.
South Korea responded at the first time. The president was interviewed directly and made it very clear:
At present, the economic situation is complicated. If we really want to spend 350 billion dollars at one time, and there is no security guarantee, such an arrangement is no different from the Asian financial crisis more than 20 years ago.
Not only the president, but the South Korean national security adviser also spoke.
More frankly, South Korea has neither the capacity nor the obligation to take the money first.
He stressed that investment should be conditional and advanced step by step, and money will not be sent out in one breath.
The answer is not obscuring.The core is only one word: money can not be given first, risk is too great.
Trump’s statement pushed the South Korean government to the tip of the wind.
On the one hand, if the "advance payment" statement is acquiesced, it will cause strong doubts in China.
People have long been concerned about foreign capital flows and exchange rate fluctuations.
On the other hand, if it is publicly denied, it could cause US dissatisfaction, causing trade talks to break.
The South Korean government's choice is to "press back first." openly stated that it does not accept one-off payments and does not recognize "prepaid payments."
At the same time, the signal is released: the agreement has not yet been negotiated, and everything depends on the safeguard mechanism.
The market heard this, and the reaction was not small.The decline in the currency against the dollar expanded, and financial stocks generally fell.
Investors worry that if the deal is too pressurized, South Korea may face capital outflows and even rating downgrades.
In order to stabilize the market, South Korea immediately stressed that it was seeking to establish a currency swap agreement with the United States.
This arrangement will ease the pressure on the dollar’s demand and can also hedge some of the risks.
But this type of exchange usually requires the Fed’s approval, not a blow of the head can be determined.
Up to now, the so-called word "advance payment" is not only a media word, but also the most sensitive thunder point in negotiations.
Once it lands, it will not only affect the relationship between the two countries, but also incite the entire Asia-Pacific financial sector.
Who is driving investment and who is afraid of exploding a crisis?
The $35 billion investment in South Korea is not an empty vent.
As early as the early negotiation stage, the two sides initially planned that South Korea would invest on a large scale in the United States, while the United States would reduce tariffs accordingly to maintain a trade surplus.
Trump described the investment as “prepaid,” largely for political reasons.
The election campaign is in which he wants to make results and convince the voters.Getting South Korea’s funding support means that its slogan “Revolving Manufacturing” has achieved.
As for how the money came, what time it came, he did not care about the details.
The South Korean government faces a completely different situation.
The domestic manufacturing industry has become a reality, youth unemployment rate is high, capital market volatility is frequent, and there is a long-term contradiction between prices and interest rates.
At this time, if large-scale transfers of funds abroad, the financial sector is in the first place.
President Lee Jae-myung's statement accurately grasped the core of the problem.
He did not deny that South Korea wanted to invest, but made it clear that it should invest on the premise of guarantee.
This guarantee is the currency exchange mechanism, risk sharing mechanism, and profit-sharing mechanism.
He pointed out that if it is implemented in the way currently proposed by the United States, it will not only be unguaranteed, but will force South Korea to actively expose itself to financial risks.
This figure of 35 billion, which accounts for two-thirds of South Korea's annual GDP, is a scale that cannot be arbitrarily moved.
The financial sector in South Korea is also working on alternatives, suggesting that investment plans be pushed forward through loans, guarantees, joint ventures, etc.
The focus is not on “who to invest” but on “who to invest” and “who to manage” after investing.
This logic is essentially different from the "advance payment" in Trump's mouth.
The currency has been continuously devalued, and the pressure on foreign exchange regulation has increased sharply.
If capital outflows accelerate in the short term, the central bank of South Korea must be prepared to increase dollar liquidity, which would create a huge bow in its monetary policy.
At this time, South Korea released a signal to negotiate a currency swap agreement with the United States.
This is not a simple exchange of currencies, but a national credit card.
If the United States does not cooperate, the security of the investment plan will be greatly reduced.
Many people in Korean political circles are deeply worried about this. Some members asked questions in Congress, accusing the government of being too weak in negotiations with the United States.
There is also public opinion that this is “in exchange for diplomatic reassurance at the expense of national financial stability.”
Trump's camp is not loose in front of the media, continuing to stress that investment will "come to account early", and said that Japan and South Korea will become the "money engine" of the U.S. economic rejuvenation.
Although this statement can win applause, it makes the atmosphere at the negotiating table more tense.
Currently, the main differences between the two sides are concentrated on two points: who decides what to invest and who to take risks.
South Korea doesn't want to be a "cash machine" with no right or responsibility, while Trump pays more attention to results and statements, and is unwilling to entangle technical details.
On the one hand, the politicians who are eager to take the results home, and on the other hand, the government is under pressure to stabilize the financial system.
This game will not be short.
One wants control, one wants control.
From the "prepaid" in Trump's mouth, it can be seen that the U.S. is at the center of this investment negotiation, not cooperating, but dominating.
There is a key intent behind it: investment projects are selected by the United States, the flow of funds is controlled by the United States, and South Korea only needs money.
South Korea is particularly vigilant about this.
Experience has shown that in similar trade-to-investment agreements, if control falls on one side, the other is basically in a “passive investment” position.
South Korea’s finance department has openly stated that the $350 billion cannot be dominated entirely by the United States.
There must be equal rights to negotiate, to participate in the selection of investment projects, and at least to have the risk assessment and management advice.
Otherwise, South Korean companies could be forced into a pool of high-risk and low-return projects.
In addition, if the investment fails, the US may be exempt from liability, while South Korea will bear the capital loss.
Trump, on the other hand, tried to pack out "Japan-Korea Investment" as part of his performance.
He previously said that Japan had pledged to provide $55 trillion, and that the funds would "come to account early," but the Japanese government's statements disagree with this.
Japanese officials did not commit to the form of advance payments, but emphasized progress in phases and flexible arrangements according to project plans.
South Korea, seeing Japan's handling, has made its position of "not paying money in advance" more firm.
Trump has said that Japan and South Korea are linking together, creating “opinion pressure.”
Trying to get South Korea into the rhythm of “everyone else has promised, you should follow.”
Direct response: Japan has no prepayment is a Japanese matter, and South Korea has its own decision-making mechanism.
Although the amount of investment is large, the way is crucial.
Not only is it important to know where the money comes from, but also to know who is responsible for using it, how it is used and where it is used.
South Korea's economic community generally supports the government's tough gesture and believes that specialized project assessment bodies should be set up.
The agency is jointly supervised by the two Koreans and the United States, and technical judgments such as profit forecasts, risk models, and exit path assessments must be made before the project is launched.
At the same time, South Korea also proposed a buffer clause.
Once the United States unilaterally changes the investment purpose or temporarily adjusts the project plan, the South Korean side has the right to suspend allocations.
There is a clear logic behind this approach: not refusing to cooperate, but having to participate in leading.
While Trump is tough, at the practical level, the White House’s economic advisory team understands that if South Korea is thoroughly suppressed, it will only lead to an abortion.
The United States has also begun to relax.
Informed sources have revealed that the two sides have been exposed to a form of "project trigger" investment.
That is, the Korean side promises to invest the total amount, but each fund must be bound to a specific project to meet the conditions to pay.
This arrangement reduces the risk of one-off payments and also offers more flexibility for South Korea.
But the question also arises—who defines the “trigger condition”?
This negotiation is not just a matter of money, but a matter of control.
How the agreement goes, success depends on the first line.
As the dispute heats up, the two sides are preparing to find a solution.
South Korea proposed that it could first sign a non-binding memorandum of understanding to lock the direction and approximate amount of investment.
It does not involve specific payment times and amounts and is not legally binding.
This could provide the U.S. with the political level of "I got the promise", and also avoid South Korea from taking on legal obligations once in a while.
This way refers to the path before the signing of the Free Trade Agreement between Japan and Korea.
At the same time, Japan also signed the MOU with the United States first, and gradually implemented the specific provisions later.
For Trump, even a mere memorandum of understanding is enough to declare victory to the media.
For South Korea, this way would reserve more room for negotiation.
On the basis of the Memorandum of Understanding, talk about the split investment plan.
The implementation threshold is set at each stage, the project plan, the cost structure, the participation list of enterprises and the expected return rate are listed one by one.
It is even possible to introduce a third-party evaluation agency, with the participation of international organizations or the AIIB, to conduct credit rating on the investment content.
Another key is the currency exchange mechanism.
South Korea has made it clear that the risk cannot be hedged without a currency exchange agreement.
This is not false noise.
Once more than $300 billion has entered the U.S. market, the supply of the currency will decline significantly, putting pressure on the dollar’s exchange rate.
The capital market may also fluctuate as a result, and the space for interest rate regulation is compressed.
The exchange of currencies is to use the credit of the US Federal Reserve to help South Korea maintain the exchange rate.
Although this arrangement is difficult to talk about, it is not without solution.
If the US is willing to cooperate, the risks of this agreement are controllable.
If not, then South Korea will need to establish a buffer for all investment plans.
Once market volatility intensifies, immediately suspend payments and trade time for space.
The key to how the deal goes is that the Trump camp is reluctant to give up the “full priority” claim, and the South Korean government is reluctant to take the political risk of “delaying negotiations.”
At present, negotiations have made progress, but are still not grounded.
South Korea is actively striving for its own security, and it is also trying to define investment as "mutual benefit" rather than "cost".
There are no winners, only losers.
If it goes too fast, South Korea will be swallowed up by the financial market;
If it goes too slowly, the United States will choose to start a new stove.
The only balance point can only be found between "project-rhythm-safety".
Time is still there, but the window is shrinking.
reference information
President of South Korea: US investment requirements may trigger crisis in South Korea's economy · Xinhuanet · 2025 ‑ 09 ‑ 22
Korean media: South Korea-US trade negotiations fall into a "tug-of-war" · Xinhua News Agency · 2025 ‑ 09 ‑ 17
Trump says he does not mind re-negotiating US-Korean trade deal · 2025‐08‐26
South Korea: 35 billion that the United States wants, we are really "unable" · New wave of finance / observer network · 2025‐09‐28