South Korea-U.S. tariff negotiations, stalled over disagreements on a $350 billion U.S. investment, are now moving rapidly. South Korean Deputy Prime Minister and Finance Minister Koo Yun-cheol, who visited the U.S. for talks, said, "We are now coordinating at a very fast pace." U.S. Treasury Secretary Steven Mnuchin said, "Negotiations with South Korea seem close to conclusion. We expect something within 10 days." Some analysts predict the two countries could reach an agreement before the Asia-Pacific Economic Cooperation summit in Gyeongju later this month.

The Trump administration appears to have partly accepted South Korea's argument that a U.S. demand for a "cash upfront" investment could trigger a foreign exchange crisis. The $350 billion figure represents 83 percent of South Korea's $422 billion in foreign exchange reserves at the end of September. As a safeguard, Seoul has requested an unlimited currency swap with the Federal Reserve, effectively a "dollar overdraft account," to protect its foreign exchange market.

Negotiators are reportedly considering alternatives, including a currency swap large enough to stabilize South Korea's foreign exchange market or investments denominated in Korean won instead of U.S. dollars. For reference, the U.S. Treasury recently arranged a $20 billion currency swap to support Argentina amid a foreign exchange shortage. The United States also appears eager to conclude talks quickly to focus on rising trade tensions with China.

Even if a breakthrough on the currency swap is reached, major challenges remain. Investing $350 billion in cash rather than through loans or guarantees is practically impossible during the remaining three years and three months of the Trump administration. Proposals to split profits 50-50 but allow the U.S. to claim 90 percent of earnings after repaying principal are unacceptable. South Korea also cannot accept conditions giving the U.S. unilateral control over investment projects, as Seoul wants funds tied to Korean companies.

Trump's repeated claims that "South Korea has agreed to pay $350 billion upfront" remain a potential wild card. The South Korean government must manage negotiations carefully, providing the U.S. with a face-saving outcome while ensuring its national interests are maximized, leaving no room for complacency until the final agreement is reached.

$350 billion Korea investment negotiations enter critical phase