Prime Highlights
- South Korea’s cabinet approved a decree to advance a $350 billion US investment plan under a trade deal signed last year.
- The plan covers $200 billion in direct investments and $150 billion in shipbuilding cooperation in exchange for lower US tariffs.
Key Facts
- Seoul defines a commercially viable project as one that fully covers principal and interest costs over its projected lifespan.
- South Korea will establish a state-backed investment body that will run for 20 years under the plan.
Background
South Korea’s cabinet approved a presidential decree on Tuesday to move a $350 billion investment plan in the United States forward, part of a broader trade deal the two countries signed last year.
The decree lays out key terms for the plan, including a definition of “commercial reasonableness,” which will guide $200 billion in direct investments across strategic American industries. South Korea separately agreed to put $150 billion into shipbuilding-related cooperation in exchange for better tariff treatment on its exports.
Seoul defines a commercially reasonable project as one that earns enough revenue to fully cover both the principal and interest costs over the life of the project. The duration of individual projects will be worked out through talks with Washington.
As part of the plan, South Korea will also set up a state-backed investment corporation that will operate for 20 years.
The investment commitment sits at the heart of a trade agreement Seoul struck with Washington, which brought U.S. tariffs on South Korean goods, including cars, down to 15%. Earlier this year, U.S. President Donald Trump threatened to push those tariffs up to 25%, arguing that South Korea’s parliament had not yet passed the legal framework needed to lock in the lower rate.
South Korea’s National Assembly passed a special bill on the investment in March with support from both sides of the political aisle, clearing the legislative hurdle.
