After tariff deal with U.S., S. Korea weighs $350b gamble and its economic fallout

Welcome to Within The Frame, where we bring the most pressing issues across the globe into focus. I'm Kim Mok-yeon.

Last week, South Korea and the United States finalized a landmark tariff agreement, one that reshapes the economic playing field between the two allies.

The deal includes a massive $350 billion Korean investment in strategic U.S. sectors, such as shipbuilding, semiconductors, nuclear energy, and biotechnology.

While some industries gained favorable terms — like semiconductors retaining Most-Favored-Nation status — others, like the automotive sector, now face a steep 15% tariff.

The Lee administration touts it as a strategic compromise, but questions remain about the long-term impacts on Korean industries, and how this fundamentally alters the existing FTA structure.

Today, we break down what's at stake, who stands to gain, and what Korea should prepare for next.

For this, we connect to Song Soo-young, professor of business and economics at Chung-Ang University. Welcome.

Also joining us from Montclair is Lee Sun-hyung, assistant professor of economics at Montclair State University. Good to see you.

(Song) Let's begin with Prof.Song, so the Korean government, domestic industries, and even foreign institutional investors are calling the outcome of the recent U.S.-Korea tariff negotiations a "solid result." Professor, we'd also like to hear your evaluation this agreement.

(Lee) On that note, when looking at the investment volume South Korea has pledged $350 billion, while Japan and the EU committed $550 billion and $600 billion, respectively.

Prof.Lee, given Korea's GDP and overall economic size, is a $350 billion investment reasonable in scale?

(Song) Turning to key sectors, the shipbuilding industry is drawing the most attention.

Of the total $350 billion in U.S.-bound investment, $150 billion is allocated to this sector.

Prof.Song, how do you view the potential and risks of the so-called "MASGA Project" for Korea's shipbuilding industry?

(Lee) Speaking of targeted investments, $200 billion is being channeled into semiconductors, nuclear power, secondary batteries, and biotechnology through a "Strategic Industry Investment Fund." The presidential office says it has built in safeguards by restricting participation to industries with real potential for U.S.-Korea collaboration.

If Korean firms join as strategic partners, what benefits or ripple effects can we expect Prof.Lee?

(Song) Let's address the auto industry too. Tariffs there will jump from 0% to 15%.

The Korean government had pushed for 12.5% until the final stages, but stopped short. Prof.Song? What will this 15% tariff mean in real terms for Korea's car manufacturers, and what strategies might help soften the blow?

(Lee) On the other hand, semiconductors, one of Korea's most vital exports — will receive Most-Favored-Nation tariff treatment.

Semiconductor exports reached a record high for July. Could this momentum have influenced the final tariff deal? What's your forecast Prof.Lee?

(Song) Staying on trade sensitivities, both countries agreed not to further open Korea's agricultural and livestock markets, including rice and beef.

However, concerns remain that the U.S. could still push for more access. How do you see that risk?

(Lee) Looking ahead, reports suggest that additional investment packages from Korean private companies will be announced in the upcoming bilateral summit.

If this comes on top of the already-promised $350 billion, what kind of pressure might this place on Seoul's domestic investment capacity and manufacturing ecosystem? Also, what kind of balance should the Korean government aim for?

(Song) Finally, some observers say the current tariff structure effectively renders the U.S.-Korea Free Trade Agreement null.

In response, what should Korea's top trade strategy be going forward to prepare for this evolving landscape?