South Korea’s trade negotiations with the U.S. have stalled over concerns about a $350 billion investment fund, similar to Japan’s $550 billion deal. U.S. Commerce Secretary stated South Korea must accept the deal or face tariffs.

South Korea’s currency market faces pressure due to the potential dollar demand from the investment package, with concerns of overwhelming the won. The won trade is significantly lower than the Japanese yen, posing challenges for South Korea.

South Korea’s economy, smaller than Japan’s, has a current account surplus of $99 billion and lower foreign reserves. The investment package could generate $100 billion in dollar demand annually, impacting the currency and economy.

To mitigate the impact, South Korea is considering a foreign exchange swap line with the U.S., similar to Japan’s arrangement. Finance Minister Koo mentioned a possible currency swap line with the U.S. once tariff negotiations conclude.

The U.S. Federal Reserve has swap line arrangements with Canada, Japan, EU, Switzerland, and others. South Korea had a temporary swap line during the pandemic, and after it expired, the Fed offered a safety net through repurchase agreements for borrowing dollars.

Read more at Yahoo Finance: Explainer-Why South Korea cannot make the same US trade deal as Japan