US Scholar: "If Following Trump's Plan, Funds Should Support Exporters Instead"

CEPR Senior Economist: "This Is Not a Good Deal"
"Trump Could Demand More Money at Any Time"

There has been criticism that the South Korean government's promise to invest 350 billion dollars (approximately 488 trillion won) in the United States, made during tariff negotiations with the U.S., is unreasonable and that it would be better to use those funds to support domestic export companies.

Yonhap News reported this on the 14th, citing the website of the Center for Economic and Policy Research (CEPR), a progressive think tank in the United States.

Dean Baker, Senior Economist at CEPR, wrote on the institute's website on the 11th (local time), "The trade agreements that South Korea and Japan signed with the United States cannot be considered good deals," making this assessment.

President Lee Jae-myung (left) and U.S. President Donald Trump are holding a summit at the White House in Washington DC, USA, on August 25 (local time). Photo by Yonhap News

Previously, South Korea concluded tariff negotiations with the United States on July 30. Under the agreement, the United States will lower the reciprocal tariffs imposed on South Korean products from the existing 25% to 15%. In return, South Korea pledged a total of 350 billion dollars in investment and economic cooperation with the United States.

However, there are still considerable disagreements regarding the specifics of the investment destinations and conditions. In particular, the U.S. side has proposed that the investment funds be used in sectors of its choosing and that it would take 90% of the profits that South Korea recoups, leading to criticism that this is essentially a "blank check" demand.

Baker pointed out, "Although the nature of the investment pledge is unclear, if it is similar to the method described by President Trump, it would be extremely foolish for South Korea and Japan to accept it." He estimated that if the United States reinstates the 25% tariffs, South Korea's export losses to the U.S. would amount to about 12.5 billion dollars. This figure is approximately 0.7% of South Korea's gross domestic product (GDP).

He argued, "It is economically unreasonable to spend 350 billion dollars to offset the decrease in exports," and added, "Even if only one-twentieth of that amount were used to directly support affected companies and workers, it would be much more advantageous for South Korea." However, he did not disclose the detailed calculation method for the export loss he estimated.

Baker also raised concerns about the sustainability and reliability of the agreement, stating, "President Trump does not feel obligated to honor the agreement and could demand more money at any time."