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South Korea-US trade negotiations are in a deadlock, and the risk of the South Korean won surges! Lee Jae-ming is alert to the recurrence of the 97 crisis
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Hello everyone, today XM Foreign Exchange will bring you "[XM Foreign Exchange Platform]: South Korea-US trade negotiations are deadlocked, and the risk of the Korean won surges! Lee Jae-ming is wary of the recurrence of the 97 crisis." Hope it will be helpful to you! The original content is as follows:
South Korean President Lee Jae-ming issued a major warning last Friday (September 19): If the government accepts the demands put forward by the United States in trade negotiations without safeguards, the South Korean economy may fall into a financial crisis no less than that in 1997!
In July this year, South Korea and the United States reached a preliminary trade agreement verbally: the United States will reduce President Trump's tariffs on South Korean goods, while South Korea needs to promise investments of up to $350 billion in the United States. However, Li Zaiming revealed that due to controversy over how to deal with investment, the two sides have not yet been able to sign a formal written agreement.
Li Zaiming said through a translation: "Without setting up a currency swap, if we withdraw $350 billion in the way the United States requires and invest all of this cash into the United States, South Korea will face the situation in the 1997 financial crisis!"
This highly anticipated interview also involved sensitive incidents in the United States detaining hundreds of South Korean citizens in recent times, as well as the www.xmtraders.complex relations between South Korea and China, Russia and other countries.
It is worth mentioning that Lee Jae-ming will start his visit to the United States on Monday (September 22), deliver a speech at the United Nations General Assembly, and become the first South Korean leader to host a UN Security Council meeting.
Trade negotiations are deadlock
U.S. www.xmtraders.commerce Secretary Lutnik previously said toughly: "South Korea should follow the agreement between Japan and the United States, either accept the agreement or continue to pay tariffs."
But Lee Jae-ming pointed out that South Korea has proposed to establish a currency swap quota to alleviate the impact of huge investment on South Korea's local Korean won market. Lee Jae-ming didn't talk about how likely the US would agree, or whether it was enough to make the deal move forward.
Li Zaiming analyzed: "The situation in South Korea is www.xmtraders.completely different from Japan. South Korea's foreign exchange reserves are US$410 billion, which is less than half of that of Japan; the Japanese yen is the major international currency, and a currency swap mechanism has been established between Japan and the United States. At present, the detailed agreement to ensure www.xmtraders.commercial feasibility is still the core of negotiations, but it is also the biggest obstacle."
350 billion US dollars of investment in the United States may drain the liquidity of the Korean won. If there is a lack of guarantee mechanisms such as currency swaps, South Korea may repeat the mistake of exhaustion of foreign exchange reserves and collapse of the local currency in 1997. Such a huge capital outflow will directly impact the stability of the Korean won's exchange rate.
The US detention incident caused diplomatic turmoil
Earlier this month, US immigration authorities detained more than 300 South Korean workers at the Hyundai Automobile Battery Factory in Georgia, accusing them of violating immigration laws, which caused a strong response in South Korea.
Lee Jae-ming admitted that the Korean people are naturally angry at the "harsh treatment" they suffer from their www.xmtraders.compatriots, which may make Korean www.xmtraders.companies wary of investing in the United States. But he stressed that this incident will not undermine the bilateral alliance between the United States and South Korea, and believes that the incident was not directed by Trump, but caused by "extreme actions" by law enforcement agencies.
Li Zaiming's office said that this visit to the United States did not arrange a meeting with Trump, and trade negotiations were not on this agenda.
Geopolitical Dilemma
When talking about the situation on the peninsula, Lee Jae-ming said that as the confrontation between the socialist camp and the capitalist democratic camp becomes increasingly intensified, South Korea, located at the forefront of Northeast Asia, may become the frontier of the conflict.
The warming of risk aversion sentiment may trigger foreign capital to withdraw from South Korean stocks and South Korean bonds, exacerbating the pressure of capital outflow.
Li Zaiming warned, "With the background of deepening cooperation between South Korea, the United States and Japan, while China, Russia and North Korea are stepping up, www.xmtraders.competition and tensions are escalating in a spiral. South Korea is in a very dangerous situation. We must find a way out for military tensions and find a way to live in peace."
The above content is about "[XM Foreign Exchange Platform]: South Korea-US trade negotiations are deadlocked, and the risk of the Korean won surges! Li Zaiming is wary of the recurrence of the 97 crisis". It is carefully www.xmtraders.compiled and edited by the editor of XM Foreign Exchange. I hope it will be helpful to your transactions! Thanks for the support!
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