Seoul: South Korea and the United States have signed a memorandum of understanding (MOU) concerning a $350 billion investment pledge by Seoul in exchange for the lowering of U.S. tariffs, as announced by the industry ministry.
According to Yonhap News Agency, the MOU was digitally signed by South Korean Industry Minister Kim Jung-kwan and U.S. Commerce Secretary Howard Lutnick. The agreement details Seoul's investment commitment made in return for the reduction of U.S. tariffs, a deal finalized on October 29. This investment will include $200 billion in cash, capped annually at $20 billion, and an additional $150 billion allocated for bilateral shipbuilding cooperation.
The U.S. has already reduced its tariffs for Korea from 25 percent to 15 percent as of August 7, with plans to slash tariffs on Korean cars and lumber to the same rate. Korean pharmaceuticals will face tariffs no higher than 15 percent, and semiconductors will receive treatment comparable to those of other competitors like Taiwan.
The MOU specifies that projects funded by Seoul's $200 billion package will be chosen before the end of U.S. President Donald Trump's term in January 2029. These projects will focus on advanced industries such as energy, semiconductors, pharmaceuticals, critical minerals, artificial intelligence, and quantum computing.
Kim explained that a Consultation Committee, led by Korea's industry minister, and an Investment Committee, headed by the U.S. commerce secretary, will oversee a special purpose vehicle (SPV) established by the U.S. to manage the joint projects. The overarching SPV will include smaller SPVs for individual projects, with Korean project managers appointed where possible.
The agreement also gives preference to South Korean firms as vendors or suppliers for these projects. The MOU outlines that the U.S. will propose investment projects for Korean review, which Korea will fund within 45 business days if it chooses to invest.
Profit distribution from the joint projects will be shared equally until a certain threshold is met, after which the U.S. will receive 90 percent of the profits, and Korea 10 percent. The MOU is described as an administrative understanding, not creating legally binding rights or obligations.
For the $150 billion allotted to shipbuilding cooperation, Kim clarified that this will involve direct investment from Korean companies, including loan guarantees and financial support, unlike the separate cash allocations of $200 billion. Profits from these shipbuilding projects will benefit Korean companies.