Broken Trust: South Korea's New Law on Managing its Pledged $350 Billion Investment into the U.S.

UCL Law for All Society
Mar 14
4 min read

By Jiwon Yu

On March 12, 2026, the National Assembly of the Republic of Korea passed new legislation—voted 226 in favour and 8 against—that aims to manage the $350 billion investment fund that was a part of the U.S.-South Korea trade deal signed last October, following Trump's threat of 'Liberation Day' tariffs. Despite the drastic hurdles and twists throughout the 2nd Trump term so far, the implementation of this new law sets a bad precedent for the future of the Republic of Korea. I aim to discuss the roadmap of how the Republic of Korea reached this point, what the new legislation entails, and the future consequences of such legislation being enacted.

The Pathway

There are plenty of twists and hurdles in this year-long roadmap, which starts with President Trump’s announcement of his ‘Liberation Day’ tariff policy on the 2nd of April, 2025. The announcement entailed two layers of tariff rates: (1) a universal 10% tariff on all imported goods and (2) a reciprocal—yet different—tariff rate on several dozen countries, including the Republic of Korea. Though the implementation of the latter was postponed for 90 days starting on the 9th of April, the impacts of the 25% reciprocal tariffs on South Korea would be primarily felt in the automotive, battery, semiconductor, and cosmetic industries.

This caused massive panic amongst South Korean policymakers and business conglomerates alike, considering that the country had just overcome a martial law crisis and were electing a new president. With the swearing-in of President Lee Jae-Myung on the 4th of June, many were sceptical as to the future of U.S.-South Korean relations, given many of the president’s comments throughout his career have often been critical of the U.S.-ROK military alliance. However, his position on that matter shifted towards that of necessity during his election campaign, and proved to be genuine once his administration reached a trade deal with the U.S. on the 30th of July, two months after he entered office.

The new trade deal, initially announced by President Trump on ‘Truth Social’ and President Lee on ‘Facebook’, would lower the reciprocal tariff rate to 15% in exchange for a pledge of $350 billion in U.S. industries and energy, including a $100 billion investment in the U.S. shipbuilding sector. Though other terms do exist, including a foreign exchange stabilising mechanism and the South Korean acquisition of a nuclear submarine, the easing of the tariff rate brought a sense of ease to South Koreans for the time being. This would be finalised on October 29th, when both administrations would meet prior to the 2025 APEC conference held in Busan a few days later.

However, this relief was short-lived, as President Trump announced at the end of January this year that he would be returning back to the 25% reciprocal tariff rate as he believed that Korea was “not living up” to the newly signed trade deal. However, once the Lee administration announced that new legislation aiming to uphold the Republic of Korea’s end of the deal would pass by the end of February, the U.S. withdrew their statements.

Yet, another shocking update would come on the 20th of February, when the U.S. Supreme Court ruled in a split decision (6 in the majority and 3 in dissent) that President Trump’s ‘Liberation Day’ tariffs were unconstitutional. They ruled that the president has no authority, within this context, to bypass Congress and implement tariffs under the 1977 International Emergency Economic Powers Act. Though all tariffs were effectively ended 4 days after the ruling, President Trump then implemented a new, but temporary, tariff rate of 10% under Section 122 of the Trade Act of 1974. He also announced on the 12 of March that, under Section 301 of the same legislation, that the U.S. would conduct open investigations into manufacturing in foreign countries.

The New Legislation

On March 12, 2026, the Republic of Korea’s National Assembly passed a bill on the management of the $350 billion investment fund, with 226 policymakers in favour of the proposed investment strategy, and 8 against. Though the bill was initially submitted in November of last year following the ‘successful’ results of the trade negotiations, there was plenty of push back from opposition parties in regards to how the money would be conjured, managed, and not crash the economy.

The passing of the bill, despite lingering frustrations, comes hours after the U.S. announcement of open investigations. With the fear of further impacting South Korea’s export- and oil-reliant economy, some experts speculate that the announcement played a significant role in its super-majority (2/3 of the votes, or 200 out of 300 members) passing.

According to a Yonhap News article on the same day, the bill would set up a new state-led—and fully state-funded—corporation specialising in the implementation of the investment package, with a paid-in capital of 2 trillion won (US $1.36 billion) to start with. The corporation will consist of 50 employees, with three members on the board of directors required to have at least 10 years of experience in the financial sector or strategic industries. Not much else has been reported about the bill at this moment.

What This Signals

With the passing of this new legislation, the implications are massive and bountiful, with the key issue of the Republic of Korea's heavy dependence on the U.S. for its trade and security still remaining. This results in several potential future consequences: (1) South Korea will almost never reach strategic autonomy as this entrenched dependency will limit the options that could be on the table had they diversified their trading and security partners; (2) the U.S.-ROK bilateral alliance will deteriorate as the passing of this bill was rushed and not fully thought-out, meaning the South Korean economy will take a massive hit in dimensions such as exchange rate; and (3) it can set a precedence for other countries—mainly China and the European Union—to take advantage of this incident to further their own national-economic and geopolitical agendas without much loss.

All-in-all, this does not seem to bode well for the Republic of Korea, both present and future. The implementation of this law not only further embeds the severe dependence on the U.S. for trade and security but could also set up future precedence for similar scenarios to erupt and cripple the South Korean economy unless the Lee administration takes drastic steps to reduce its reliance on the U.S., and China to an extent, in both aspects.

Sources:

Edited by Artyom Timofeev

Image source: https://www.investmentmonitor.ai/news/south-korea-approves-us-investment-bill/

Broken Trust: South Korea's New Law on Managing its Pledged $350 Billion Investment into the U.S.

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