Key facts
- South Korea's cabinet approved a presidential decree to enable $350 billion in strategic US investments.
- The decree outlines terms for $200 billion in direct investments in strategic U.S. industries.
- An additional $150 billion will be invested in shipbuilding cooperation.
- The investment plan is part of a trade deal to secure reduced U.S. tariffs on South Korean goods.
- South Korea defines 'commercial reasonableness' as projects covering principal and interest costs.
South Korea's cabinet has approved a presidential decree that will allow for $350 billion in strategic investments in the United States to proceed under a trade agreement finalized last year. This decree specifies the terms and conditions for these investments, including the definition of "commercial reasonableness" for $200 billion allocated to direct investments in key U.S. industries.
In addition to the direct investments, South Korea has committed $150 billion towards shipbuilding-related cooperation, a move expected to result in more favorable tariff treatment on South Korean exports to the U.S., such as automobiles. The "commercial reasonableness" criterion means that projects must generate sufficient revenue to cover both the principal and interest of the investment over their projected lifespan, with project lifespans to be determined through negotiations with Washington.
A state-backed investment corporation will be established in South Korea to manage these investments for a period of 20 years. This initiative comes after U.S. President Donald Trump previously threatened to impose tariffs as high as 25% on South Korean goods, citing the need for the trade framework to be enacted. South Korea's National Assembly passed a special bill supporting the investment plan with bipartisan backing in March.