Japan and South Korea Relay Investment in the U.S., Is the U.S. Stock Market the Biggest Winner? Japan has just invested $550 billion, and South Korea immediately follows with $350 billion

According to the Zhitong Finance APP, U.S. President Donald Trump and South Korean President Lee Jae-myung finalized an important trade agreement on Wednesday, marking the conclusion of implementation consultations following the U.S.-South Korea trade framework agreement reached in July. Trump's ongoing trip to Asia has already brought significant investments to the U.S., with the Japanese government announcing a list of potential investment projects for its $550 billion U.S. investment tool on Tuesday, and on Wednesday securing a significant agreement for South Korea to invest up to $350 billion in the U.S.

South Korea's policy chief Kim Yong-bum stated on Wednesday that under the trade agreement, South Korea will invest $150 billion in the shipbuilding sector, with an additional $200 billion committed to investments in the U.S., aiming to make it resemble the agreements reached with the U.S. and Japan. This indicates that South Korea can use not only equity but also loans and loan guarantees to fund this investment plan, which is a key concession.

Trump described the meeting with the South Korean president as "excellent," stating that they "basically finalized a trade agreement" during a dinner hosted by Lee Jae-myung on Wednesday night.

"I think we reached conclusions on many very important matters," Trump said in an interview.

Following the initial reports about the agreement, the South Korean won rose by 0.9% against the U.S. dollar. The South Korean finance minister stated last week that the recent weakening of the won reflected market concerns about the agreement not being finalized.

Before Trump's visit to South Korea, both sides had downplayed the possibility of finalizing the agreement, making the newly reached U.S.-South Korea trade agreement positive news for both the U.S. and South Korean markets. Under the trade agreement, due to South Korea's commitment to invest $350 billion in the U.S., the U.S. will limit tariffs on South Korean goods to 15%, significantly reducing from the previous 25% reciprocal tariff.

During the negotiations, the U.S. maintained a 25% tariff on South Korean automobile imports. This put South Korean automakers at a disadvantage in competing in the U.S. market, as the Japanese government had previously finalized its agreement in September, securing only a 15% tariff. Kim Yong-bum stated that these tariffs will now be significantly reduced to 15%.

Just days before the agreement was reached, Lee Jae-myung indicated that key details of the $350 billion investment package remained a sticking point; however, Trump stated that the agreement was "very close" to completion, even as both sides had differing views on the progress as negotiations approached their conclusion.

Kim Yong-bum stated that the agreement will last until January 2029, although actual investment disbursements will occur over the long term. South Korea will also be guaranteed that its pharmaceutical product exports will match the minimum tariff policies offered by the U.S. to any trading partner.

According to Kim Yong-bum, investments in the U.S. will be capped at no more than $20 billion per year under the agreement. Earlier this month, the South Korean central bank noted that this amount would be the maximum available dollar scale that would not negatively impact the local currency market.

The U.S. also allows South Korea's $150 billion shipbuilding investment to be guaranteed by domestic and foreign commercial banks, thereby reducing pressure on the won in the foreign exchange market. Regarding the specific investment profit distribution mechanism, the specific profits from U.S. investments will be shared equally between the two countries before the repayment of principal and interest Both parties also agreed that the tariff level on semiconductors should not be lower than the tariff level applicable to Taiwan (the main competitor of South Korean chip manufacturers).

Kim Yong-hwan stated that the South Korean government has set multiple safety measures in this investment plan to limit financial market risks and protect the foreign exchange market.

He emphasized that only projects that are "commercially viable and have guaranteed cash flow" will be significantly advanced, and noted that this clause will be clearly written into the memorandum of understanding between the two parties.

He added that both sides agreed that if South Korea cannot recover the principal within 20 years, the profit distribution terms can be adjusted to retain flexibility in repayment. The agreement will also limit annual disbursements to $20 billion and will adopt a "umbrella" special purpose company structure, allowing losses from one project to be offset by profits from another project.

"These measures ensure that the $350 billion commitment will not cause severe shocks to the foreign exchange market," Kim Yong-hwan emphasized in an interview. In addition, South Korea's large-scale investment in the United States will be carried out in phases and will not be funded through direct purchases of U.S. dollars.

The full details of the agreement are expected to be announced in the coming days, which are anticipated to include additional safety guarantees. The White House did not immediately comment on the details disclosed by South Korean officials.

This agreement can be seen as another significant achievement to add to Trump's list during his trip to Asia, and the recent announcement of major investment plans by Japan and South Korea in the United States is also a significant positive catalyst for the valuation and overall fundamental expectations of the continuously rising U.S. stock market.

For this round of the super bull market in U.S. stocks that began in early 2023, under the impetus of such large-scale investments from Japan and South Korea, the market may set aside the so-called "AI bubble theory," and under this massive investment catalyst, the trajectory of the U.S. stock market bull run may continue.

The "fact sheet" from Japan's Ministry of Economy, Trade and Industry shows that the intended projects cover energy to AI/key minerals, with a preliminary list of companies including three major Japanese giants: SoftBank, Westinghouse, and Toshiba, with individual project scales ranging from $350 million to as high as $100 billion (such as AP1000 and SMR), which means substantial capital expenditure in the industrial chain, especially for the U.S. AI computing industry chain covering nuclear power/electric equipment, AI infrastructure, and semiconductor manufacturing chain, which is a significant positive factor.

Regarding investment supervision in Japan, the U.S. side will establish an investment committee to lead the selection process and may increase tariffs/adjust distributions to enhance enforcement constraints if the Japanese side does not contribute funds; at the same time, it promises to expedite access and permits for federal land/water/electricity, which is very beneficial for accelerating AI infrastructure and large chip manufacturing projects.

In terms of the transmission to the U.S. macroeconomy, especially for the persistently weak manufacturing capacity and the overall non-farm employment market in the U.S. in recent years, this will form a significant driving force, and this rare large-scale foreign investment along with the Trump administration's so-called "America First" policy framework will push U.S. companies to focus more on procuring domestic goods