The core of the tariff negotiations that Korea and the United States concluded on the occasion of the summit is to set the cash investment at 200 billion dollars out of the 350 billion dollars (about 500 trillion won) investment package in the United States, and to make partitioned investments over at least 10 years with an annual cap of "20 billion dollars (about 28 trillion won)." It is the result reached after more than three long months of anxious tug-of-war, brief hopes, and repeated disappointments. Unlike Japan, setting an annual limit and agreeing to make long-term payments according to milestones (progress) is an achievement, but concerns also persist that shocks to the foreign exchange market will be unavoidable in the process of raising up to 20 billion dollars each year.
Kim Yong-beom, the Presidential Chief of Staff for Policy who led Team Korea's tariff negotiations for three months, said in a Nov. 3 interview with ChosunBiz that there is no need to worry about this. He said it can be covered with revenue from managing the foreign currency assets we currently hold. He also said, "I don't think there will be any new shocks to Korea's foreign exchange market. None at all." Kim said the Bank of Korea's publicly suggested "annual 15 billion to 20 billion dollars" for the U.S. investment amount helped in the negotiations, adding, "The Central Bank conducted a precise analysis. Twenty billion dollars a year is the amount of foreign currency that can be raised within a year without shocking our foreign exchange market."
The Korea-U.S. tariff negotiations that began at the end of July dragged on as they ran into the U.S. demands for "most remittances" and "25 billion dollars a year for eight years." The negotiating dynamic, which had seen no progress until the day before the Korea-U.S. summit, changed from the morning of the 29th, a few hours before the meeting. As President Donald Trump headed to Korea after finishing the U.S.-Japan talks, he sent word through U.S. Commerce Secretary Howard Lutnick, the U.S. "key man," that "we will accept some of Korea's demands." Deputy Minister Kim recalled that the moment Trump, who appeared at 1 p.m. the same day as a special speaker at the Asia-Pacific Economic Cooperation (APEC) CEO Summit, said, "Kim Jung-kwan is a very tough negotiator," was the "completion point of the negotiations." Lutnick even appeared in Kim's dreams, he said. "My wife said I called out 'Lutnick' in my sleep," he said with a laugh. That is how much all-out effort was poured into the tariff negotiations.
Kim said 20 billion dollars a year is "a limit that can earn the market's trust," adding that the "milestone" is the key. "We send the money according to the performance of implementation of the project; it's not sent unconditionally in advance," he said. "Because we put in that mechanism, the investment money will not go all at once. Our government gave a lot of thought to making sure nothing is missed (to recover the investment)." He repeatedly noted that instead of newly issuing foreign currency liabilities, the government will use revenue from managing already held foreign exchange assets, and said, "There will be no new shock to the foreign exchange market."
In particular, he said he repeatedly stressed to the U.S. side how important it is for Korea to alleviate "foreign exchange market anxiety." Kim said, "Two weeks ago the foreign exchange market was unstable. We showed the U.S. side graphs of the dollar index, the yen, and our usual indicators," adding, "It's important to be repaid later, but there must be no anxiety on the FX side. Because the Republic of Korea is a country that went through a foreign exchange crisis, if the FX side is unstable, no matter how impressive an MOU we sign, we lose trust and tariffs or anything else will not be easy. I made that case many times."
According to Deputy Minister Kim, the two countries also included language in the memorandum of understanding (MOU) concluded on the occasion of the summit to spell out "commercial reasonableness." "There is a clause in the MOU that defines commercial reasonableness," he said. "We made a lot of efforts so it would not be interpreted ambiguously. The fact that we inserted a separate clause to define it shows concerns can be eased." He also said that in semiconductors, the joint fact sheet specifies that "tariffs will be applied at a level not disadvantageous compared with Taiwan."
However, he said it was "very regrettable" that steel tariffs were excluded from this negotiation. Even so, he said, "The United States has not made exceptions in this negotiation for any country on steel item tariffs," adding, "It is truly a regretful part. To do MASGA (Make American Shipbuilding Great Again, an investment project in U.S. shipbuilding), most of it involves steel, so we have to try (negotiations) again later. We couldn't do it this time."
The two- to three-page joint fact sheet and the MOU with 30 articles concluded on the occasion of the Korea-U.S. summit will be released as early as this week. The MOU will contain details related to the 350 billion dollars U.S. investment package, and the joint fact sheet will include key points in each area covered by the summit, such as investment, trade, and security. Deputy Minister Kim said, "The MOU requires signatures, and some of its contents will be reflected in the joint fact sheet," adding, "The two documents have different natures." Regarding the confusion caused earlier when Lutnick said, "Semiconductors were not included in this negotiation," Kim said it only meant it was not specified in the MOU, the document related to the 350 billion dollars investment, and that it is included in the joint fact sheet.
◇ "Real estate is harder than tariffs… launching a 'ministers' meeting' for supply"
After three rounds of real estate measures, the market is looking only to "large-scale supply." To stabilize home prices, the role of supply is ultimately more crucial than regulation. The government has pledged to "break ground on 1.35 million dwellings in the greater Seoul area over five years," but it is difficult to meet the urgent demand right away. Deputy Minister Kim said he will launch a "ministers' meeting on expanding housing supply" to speed up supply. He also plans to quickly expand related organizations within the Ministry of Land, Infrastructure and Transport and the Korea Land & Housing Corporation (LH).
He also shook his head, saying, "It turned out that pursuing domestic real estate policy is harder than tariff negotiations, which find common ground based on principles between nations." That means it is an issue in which various interests and political gains and losses are intricately intertwined. Deputy Minister Kim said, "Given current market conditions, there is a high possibility that real estate prices will continue to rise, so we plan to supply dwellings 'desperately.'" He added that a body including all ministers of the related ministries will be created, and that within MOLIT and LH, responsibility for housing supply will be assigned by designating project managers for "Umyeonsan," "Seoripul," and the like.
He also said the role of the Seoul Metropolitan Government is crucial. To stabilize home prices, stable housing supply in Seoul must come first, but the city, which has permitting authority for redevelopment and reconstruction, is not taking the lead. Deputy Minister Kim said, "There are limits to what MOLIT alone can do, and the role of the Seoul Metropolitan Government is the most important," adding, "Permits, establishment of cooperatives, changes of use, floor area ratio—aren't these all done by the city? Seventy to 80 percent of reconstruction and redevelopment is the city's responsibility."
He particularly noted that because the Seoul Metropolitan Government handles housing permits on its own, bottlenecks occur, and he proposed allocating authority to each district (gu). Deputy Minister Kim said, "In Gyeonggi Province, each city and county plays a role, but in Seoul the role of the districts is very limited," adding, "There is a need to improve governance, including the relationship between the central government and the Seoul Metropolitan Government, and between the city and the districts." He also said, "Yeongdeungpo-gu, Guro-gu, and Geumcheon-gu have many quasi-industrial areas. Those places also need to be developed," adding, "Supply is possible only if the central government and the Seoul Metropolitan Government join forces."
He also said the government is proactively reviewing lifting greenbelt restrictions and redevelopment and reconstruction policies to increase supply. Deputy Minister Kim said, "To stabilize the market, it is important to give people the confidence that it is 'worth waiting a bit' for supply," adding, "If new dwellings are supplied, prices 40% to 50% below market may be possible. If supply measures continue to come out, people will be willing to wait."
◇ "Economic activity normalized rapidly under the Lee administration, and next year will be better"
Real gross domestic product (GDP) growth for the third quarter came in at 1.2%, 0.2 percentage points above the previous estimate (1.0%). Regarding monetary indicators, broad money (M2) rose 8% from a year earlier (as of August). Deputy Minister Kim, introducing these indicators, said, "Exports and investment are improving, and the heat of economic activity is clearly rising." He also said that after negative growth in the first quarter and roughly zero in the second, real and financial indicators have improved in tandem since June.
He said, "Rather than a 'bubble,' the stock price rise reflects a recovery in fundamentals," adding, "Since the president took office, the stock market has risen 60%, which has far surpassed what was thought 'unattainable.' It will get even better."
He particularly expects that as Korea rises to the center of AI semiconductors and the power sector, exports, investment, and consumption will also improve. Regarding AI, the government is reviewing an easing of the separation of industrial and financial capital to support large-scale investment. After President Lee met OpenAI chief Sam Altman, the president gave direct instructions to aides. Deputy Minister Kim said, "We will discuss creating special laws for specific industries in advanced sectors."