Lee Warns U.S. Tariff Talks Are Rattling Korea’s FX, Seeks a “Commercially Rational” Deal

NEW YORK/SEOUL - South Korean President Lee Jae-myung said in New York that ongoing negotiations with Washington over tariff relief are affecting foreign-exchange sentiment in Korea, while adding that both sides can still reach a "commercially rational" outcome. Lee delivered the remarks during meetings with U.S. lawmakers on the sidelines of the UN week, noting that a large U.S.-bound investment package tied to the tariff talks could weigh on Korea's FX reserves if not structured with adequate safeguards.

What the talks actually cover

Officials have framed the negotiations as a tariff-for-investment arrangement sketched in July: prospective tariff relief for Korean exports paired with a multi-year investment program in U.S. strategic industries such as semiconductors, batteries, critical minerals, shipbuilding and pharma. As of late August, negotiators were working toward a non-binding MOU to set management and governance of an investment pool often cited at about $350 billion, with Seoul emphasizing loans and guarantees rather than a pure cash outflow and disputing claims about disproportionate profit shares. The structure remains unsigned.

Why markets are sensitive

Korea's FX market is highly responsive to capital-flow headlines. Over the weekend, Lee cautioned that meeting U.S. investment demands without a liquidity backstop-such as a swap line-could risk stress reminiscent of 1997, if disbursements were executed in a front-loaded, cash-heavy manner. His New York comments reiterate that pace, funding mix, and liquidity buffers will determine how the deal lands in the won market.

Where the sticking points are

Negotiations now turn on three elements: (1) funding mechanics-who controls disbursement and on what timetable; (2) FX risk management-whether swap-type language or equivalent buffers are baked into the text; and (3) governance-ensuring project choices are driven by commercial criteria rather than political timing. Lee's formulation-"commercially rational"-is a signal that Seoul wants phased, demand-tested deployments under a board structure that keeps the process auditable and market-driven.

Industry implications

For Korean firms with U.S. footprints-from memory and foundry chips to EV batteries, shipbuilding and pharma-even limited tariff relief can move U.S. prices and procurement. Finance teams, however, are looking for predictability - how much of the program is loans or guarantees rather than upfront cash, how the fund would be overseen on the U.S. side, and when payouts would be made. That is why Seoul is pushing for phased deployment and risk-sharing, while Washington wants visible commitments that fit its industrial-policy goals.

What to watch next

Draft language in the coming days will show whether the parties converge on (a) swap or swap-adjacent buffers, (b) phased, project-finance style outlays, and (c) board veto/thresholds that protect commercial decision-making. Market reaction will be visible first in won basis and cross-currency liquidity; more front-loading would likely lift volatility, while a phased structure should damp it. Separate reporting in Seoul also notes continued concern that tariff talk headlines alone can stir FX nerves-another reason both sides are under pressure to show a stable path.

Bottom line: The negotiating frame is now explicit: tariff clarity on the U.S. side, and on Korea's side liquidity safeguards, phased deployments, and commercially led governance. If those conditions align, the deal can proceed without jolting Korea's currency; if not, expect the won to keep pricing uncertainty until the text is reworked.