South Korea's Finance Minister, Koo Yun-cheol, indicated that the nation's sizeable investment plan of $350 billion targeting strategic sectors in the United States is unlikely to start in the first half of 2026. This development arises from a November trade deal between the two countries that resolved tariffs imposed during the Trump administration, with South Korea pledging significant investments in return.
Koo noted that even if certain projects, such as nuclear power plants, receive approval, the process involves multiple procedural steps including site selection, detailed design work, and construction phases. Consequently, any initial capital outflows are expected to remain substantially smaller than the agreed annual cap of $20 billion in dollar investments set by both parties.
The minister underscored that the current foreign exchange situation imposes restrictions on investment expenditure within this year, limiting large-scale dollar outflows during this period.
Meanwhile, the South Korean won has experienced significant depreciation, troubling officials as it approaches levels not seen since the 2007-2009 global financial crisis. Despite robust export performance and a strong stock market rally in the prior year, the won’s weakness is a critical concern amid plans involving large capital movements overseas.
Koo warned market participants against provoking excessive volatility in the won, which recently hovered near a 16-year low of 1,473.8 against the dollar, weakening over 2% this year alone. He acknowledged that depreciation pressures have exceeded initial expectations, prompting the government to prepare rapid intervention measures designed to curb herd-like market behaviors that could exacerbate currency declines.
Authorities emphasize their intolerance for destabilizing actions in the foreign exchange markets and aim to maintain orderly conditions.
The U.S. Treasury has recognized South Korea’s efforts to support the won, with Secretary Scott Bessent communicating concerns that recent currency depreciation diverges from South Korea’s underlying economic fundamentals.
Regarding implementation of the investment package, the South Korean government intends to expedite the process by seeking parliamentary review from February for a bill that creates a special fund aligned with the trade deal. However, uncertainties remain, particularly due to a pending U.S. court decision on the previous tariffs, which could influence the timeline and terms of execution.
No definitive projects have been selected yet under the investment agreement. Nonetheless, nuclear power infrastructure has been mentioned as a possible focus area by U.S. Commerce Secretary Howard Lutnick.
Efforts to stabilize the won include invoking the National Pension Service to offload dollar holdings and encouraging exporters to convert greater proportions of their foreign earnings back into won. Despite these initiatives, the currency continues to cling near critical psychological thresholds.
Another factor intensifying dollar demand is South Korean investors’ strong appetite for overseas equities amid a widening interest rate gap with the United States, which has reached two percentage points — its highest since 1999. This environment puts additional upward pressure on foreign currency outflows.
Key Points:
- South Korea’s planned $350 billion investment in the U.S. under their trade deal is unlikely to begin in the first half of 2026, partially due to procedural and project development timelines.
- The South Korean won is experiencing historic depreciation pressures, causing concern for authorities managing large foreign exchange outflows.
- The bilateral agreement caps annual dollar investment outflows at $20 billion to mitigate significant currency impact.
Risks and Uncertainties:
- Pending U.S. court rulings on past tariffs could delay or complicate the implementation of the investment package.
- Continued depreciation of the won risks increasing capital outflows and market instability if not curbed effectively.
- Uncertainty remains regarding specific project selections under the investment plan, including nuclear power developments.
Sectors Impacted: Currency markets, strategic investment sectors including nuclear energy, stock and export markets in South Korea.
Disclosure: This article is an impartial report based on official government statements and public data without any promotional intent.