Seoul: South Korea finds itself in the awkward position of being treated less like a treaty ally than a cash dispenser. Washington’s message has been blunt: Accept the terms of a $350 billion investment package or face a 25 percent tariff wall.

According to Yonhap News Agency, this ultimatum, delivered by US Commerce Secretary Howard Lutnick, is not the language of partnership but of coercion – and it is straining the credibility of an alliance that has long been framed as mutually beneficial. The backdrop is the July agreement between Seoul and Washington, which lowered tariffs from 25 to 15 percent in exchange for South Korea’s commitment to channel $350 billion into the US economy. At the time, the deal was hailed as proof that hard bargaining could avert protectionism. However, Washington began pressing for conditions that far exceeded what had been outlined, leading to a collapse in negotiations in New York last week.

At the heart of the dispute is not only the staggering sum but the terms of execution. The US insists that South Korea replicate Japan’s arrangement: a $550 billion fund, investment targets dictated by US President Donald Trump, disbursements within 45 days, and a profit-sharing formula under which Washington claims half of earnings until principal is repaid and 90 percent thereafter. For Seoul, with foreign reserves of $410 billion, the demand amounts to pledging nearly four-fifths of its currency buffer within three years, posing a risk for market instability.

Seoul has so far held firm. President Lee Jae Myung has declared that no agreement contrary to the national interest will be signed, while trade officials stress that only rational and fair terms are acceptable. South Korea favors a hybrid approach: limited direct equity investments combined with guarantees and loans that would temper the drain on reserves and cushion currency markets. This is not a refusal to cooperate but an attempt to align commitments with capacity.

The demands from Washington are not only financial in nature. Linking tariff relief to tribute-style investment undermines US trade policy’s credibility and compromises alliances built on reciprocity. Forcing an ally into terms it cannot meet risks leaving deep political scars. Already, Seoul’s negotiators have returned home empty-handed, and Korean exporters face the prospect of tariffs returning to 25 percent.

The irony is clear. At a time when Washington seeks to rally allies for supply-chain resilience and strategic competition with China, it is imposing conditions on one of its closest partners that resemble an extortionate loan. This is not how a rules-based order is reinforced.

For South Korea, the imperative is clear. It must resist being boxed into a deal that would deplete reserves and expose its economy to shocks. The government’s pledge to defend rationality and fairness should serve as the foundation of its stance. Ultimately, this standoff will reveal whether the US views allies as partners or payers. Genuine alliances rest on shared interests and mutual gain, not on ultimatums and asymmetrical contracts. Washington should recall that strength lies not in twisting arms but in fostering trust.