South Korea’s President Lee Jae-Myung warned that assembly Washington’s $350 billion funding demand with out protections might set off a monetary disaster as extreme as 1997.
In July, Seoul and Washington agreed verbally that the U.S. would minimize tariffs on Korean exports if Korea parked $350 billion in American property. They haven’t finalized particulars on methods to safeguard Korea’s reserves.
Korea held about $416 billion in international forex reserves on the finish of August. Lee defined that shifting $350 billion into U.S. markets with out a forex‐swap line would drain Korea’s liquidity and spark sharp gained depreciation.
In 1997, Korea’s reserves fell from $30 billion to $4 billion, debt surged to $153 billion, and the nation sought an IMF bailout after its mounted‐fee protection collapsed.
Today’s Korean corporations nonetheless carry heavy greenback debt and depend upon quick‐time period funding. A sudden outflow might elevate borrowing prices, weaken the gained, and shake investor confidence.
Seoul proposes a U.S.–Korea swap line, as utilized in 2008 and 2020, to safe greenback funding. Washington, nonetheless, pushes for direct Korean money investments in chosen initiatives.
Lee additionally condemned U.S. immigration raids that detained over 300 Korean employees at a Hyundai plant in Georgia. He referred to as the ways “harsh” and warned they may deter Korean corporations from U.S. investments.
This standoff comes as Lee attends the U.N. General Assembly and chairs a Security Council session—historic firsts for a Korean president. Since taking workplace in June, Lee has moved to regular Korea’s economic system and recalibrate ties with main powers.
He met former President Trump in August, forging a private rapport however no formal pact. A monetary shock in South Korea, the world’s tenth-largest economic system, would ripple by international provide chains and markets.
It would additionally pressure the U.S.–Korea safety alliance at a tense second on the peninsula. Lee insists on clear safeguards to protect Korea’s financial sovereignty and forestall previous errors. As each capitals negotiate, the world watches whether or not they can steadiness strategic partnership with fiscal prudence.
