"Currency swap is a necessary condition…Negotiations underway on the investment fund financing method"

Korea-US tariff talks 'at an impasse'

President meets with Scott Besent, U.S. Treasury Secretary

"Korea's economic scale and foreign exchange market differ from Japan's"

Conveyed concerns about increased domestic market volatility

Besent only stressed "Korea is an important partner"

Even if a currency swap is resolved, many tasks remain

Significant differences remain over funding methods for the investment fund

"No sacrifice of national interest due to negotiation deadlines"

President Lee Jae-myung on the 24th (local time) met with U.S. Treasury Secretary Scott Besent in New York and stressed the necessity of a currency swap as a precondition for resolving tariff negotiations. Secretary Besent said, "I will discuss this internally with the relevant departments," but did not give a definitive answer.

LEE: "Korea's situation is different from Japan's"

President Lee told Secretary Besent that "I hope discussions will progress in a direction that is consistent with the commercial rationality and benefits of both countries," White House policy chief Kim Yong-beom said. The president also said, "The Korea-US relationship is very important as an alliance, and close cooperation between the two countries is vital for maintaining and developing the alliance not only in security but also economically."

President Lee focused on conveying concerns about increased volatility in the domestic foreign exchange market surrounding the $350 billion fund. The president said, "Although there was an agreement on a US investment package with Japan, Korea is very different from Japan in terms of economic scale and foreign exchange market infrastructure," adding, "I hope negotiations proceed well taking these aspects into account." Japan holds a reserve currency, has a currency swap with the U.S., and holds more than twice our foreign exchange reserves.

In response, Secretary Besent said, "There may be temporary, short-term difficulties between Korea and the U.S., but they can be sufficiently overcome." He also said, "President Trump knows that Korea is important to the U.S., and has repeatedly emphasized that Korea is an important partner especially in the shipbuilding sector," adding, "Korea's cooperation and support in shipbuilding are very important and appreciated." He responded, "I understand there has been a lot of progress in trade negotiations between the two countries, and I will discuss this sufficiently with the relevant departments (regarding the foreign exchange market)."

About 30 minutes into the meeting, Kim Yong-beom, Deputy Prime Minister and Minister of Economy and Finance Koo Yoon-chul, National Security Office Director Wi Sung-lak, and others attended. After the meeting, Deputy Prime Minister Koo held a separate meeting with Secretary Besent to discuss the investment package to the U.S., exchange rate negotiations, including a currency swap. Bank of Korea Governor Lee Chang-yong also met with Secretary Besent at the International Monetary Fund (IMF) last week to convey his views. Kim said, "Meeting with the minister in charge of the foreign exchange market was a significant watershed in the negotiations and very meaningful," adding, "I think it was a positive meeting."

Negotiations ongoing over the format and terms of the investment fund

Kim said that the unlimited currency swap Korea proposed to the U.S. is "a necessary condition for concluding the tariff negotiations," adding, "The impact on the foreign exchange market would be too great, and if this issue is not resolved we cannot move forward. At the very least, the U.S. must provide an answer on the basics."

There are also significant differences over how to raise the $350 billion fund. Kim explained, "The content agreed in the memorandum on July 31 and the memorandum of understanding the U.S. later sent were completely different," adding, "We expected, according to international investment practice, loans, guarantees, and some investments, but the U.S. insisted that the cash flow described in the document was closer to equity (share investment)." He continued, "We have demanded that cash flow be divided into loans, guarantees, and investments, but the U.S. has not agreed."

Kim said, "Under the current regulations of the Export-Import Bank, it would be difficult to manage a $350 billion fund," adding, "Either amend the Export-Import Bank Act or obtain parliamentary approval for guarantees." He also said, "(Before recovering the principal of the investment fund) the proposal we made was that the U.S. and Korea take profits in a 9-to-1 split and (after recovery) split 1-to-9."

Kim said, "There has been considerable progress in trade issues under discussion with USTR Representative Katherine Tai," adding, "We are making it clear that we cannot discuss rice and beef market openings." Regarding the timing of a deal, he said, "We will not sacrifice principle (national interest) because of negotiation deadlines," but added, "The APEC meeting in Gyeongju at the end of next month will be an important opportunity."

New York = Han Jae-young / Kim Hyung-kyu reporters jyhan@hankyung.com