Capstone believes the US-South Korea investment deal will support firms involved in the US nuclear energy and shipbuilding sectors. While the Trump administration will direct South Korea’s funds, the country has a limited veto, and we expect it to be methodical as it weighs the currency and macroeconomic risks associated with its commitments. Firms with connections to Commerce Secretary Howard Lutnick are best positioned to participate in projects.
- South Korea pledged to invest $350 billion in the US as part of a trade agreement it struck last year with the Trump administration. The investments will target strategic sectors, including shipbuilding, and will be chosen by President Trump with advice from the Department of Commerce.
- South Korea has some limited ability to direct the funding, but has established a robust domestic process for evaluating investments. South Korea’s concerns about the impact of large investment commitments on its currency markets will likely lead to a methodical investment approach.
- Some projects will originate from the US-South Korea investment agreement, though the Trump administration is likely underestimating how long it will take to finance, build, and staff projects. Still, this will not reduce the administration’s interest in promoting these projects to generate positive headlines and in demonstrating progress in its reshoring agenda.
- Firms prepared to navigate uncertain timelines will be better positioned to take advantage of the investment agreement compared to firms that are seeking binding commitments on a brief timeline.
Agreement and Process Overview
On July 30th, 2025, the US announced it had reached a trade and investment agreement with South Korea. As part of the deal, South Korea agreed to invest $350 billion in key US industries, including $150 billion into the US shipbuilding sector. Other investments would be directed towards energy, semiconductors, pharmaceuticals, critical minerals, artificial intelligence (AI), and quantum computing, among other strategic sectors. The deal also lowered reciprocal tariffs and certain Section 232 tariffs on South Korean goods to 15%.
The process for making investments was outlined in a Memorandum of Understanding (MOU) released by the South Korean government. The MOU outlines a structure broadly similar to the terms of the US-Japan investment agreement, with projects selected by an Investment Committee led by Commerce Secretary Howard Lutnick. A Consultation Committee will also be set up to provide input to the Investment Committee, and will be chaired by Korea’s Minister of Trade, Industry and Resources, and other Korean and American officials. The Investment Committee will make recommendations to President Trump, who has the final authority over whether to authorize a project.
The MOU emphasizes that investments must be “commercially reasonable,” but limits South Korea’s input into the selection process. Once Trump selects a project, South Korea has 45 days to fund it. Though South Korea is not obligated to follow Trump’s guidance, failing to do so risks Trump reinstating higher tariffs or losing profits from other projects in the deal. South Korea will likely raise money to fund projects by issuing government bonds and from trading profits on the country’s foreign exchange reserves. The MOU does not outline how the parties will determine if a project is commercially reasonable.
South Korea’s work to formalize the MOU will help the country evaluate US-selected projects. It also reflects South Korea’s lack of formal input into the US selection process. The South Korean parliament recently passed a bill to establish a state-run corporation to oversee the investments and four committees to manage the process. The Risk Management and Business Management committees will work to assess the overall risk and feasibility of projects, respectively, and the Operations Committee will have final approval on whether to fund a project. The fourth committee, a subcommittee of the National Assembly, will have sole authority over whether to make strategic investments that are not commercially feasible. However, the US still has sole formal authority to propose investments and has not established a transparent process to do so, potentially limiting the efficacy of these committees.
Nuclear and Shipbuilding Will Likely Be the Focus of Investments
Korean EPCs Expected to Play Significant Role in America’s Nuclear Renaissance
We believe Korean engineering, procurement, and construction (EPC) firms are well-positioned to benefit from direct foreign investment in the American nuclear industry. Given the limited number of US-based EPCs with prior experience building nuclear reactors over the last three decades, Korean counterparts stand out as experienced companies capable of executing domestic projects. The following are examples that demonstrate preexisting relationships between American developers and Korean EPCs that, in our view, provide realistic destinations for investments from the trade deal:
- Project Matador Advanced Energy and Intelligence Campus, Units 1-4 (Texas): Hyundai E&C and Doosan each partnered with Fermi America to build four large reactors as part of the company’s planned energy campus to power co-located artificial intelligence data centers.
- Pioneer Units 1-2 (Michigan): Hyundai E&C signed a contract with Holtec International to build its small modular reactor (SMR) design at the existing Palisades Nuclear Plant.
- Xe-100 Deployment (Washington, Texas, etc.): Korea Electric Power Corp.’s (KEPCO) subsidiary, Korea Hydro & Nuclear Power, and Doosan Enerbility signed a strategic collaboration agreement with X-energy and Amazon to accelerate the deployment of the SMR design across the US.
Recent licensing reforms at the US Nuclear Regulatory Commission (NRC) will help instill confidence with Korean EPCs and other potential investors by reducing federal permitting timelines from a 2-5 year process to an 18-month sprint.
However, we believe the real obstacle for new nuclear projects is federal financing. The US Department of Energy’s (DOE) Office of Energy Dominance Financing (EDF) is more than willing to provide low-interest loans to nuclear developers, but cost overruns remain a key concern among government officials and industry stakeholders. To mitigate this problem, we believe American developers and partnering Korean EPCs will most likely need to be reassured that their first-of-its-kind projects will have some form of cost overrun insurance, whether its reliable access to the Section 48E investment tax credit or a new federal backstop program.
Beyond the prospect of Korean EPCs being focal parts of the US-Korea trade deal, we note that the DOE is also reportedly open to providing loans to finance new partners’ designs, including KEPCO’s APR-1400 reactor, which has already received a design certification from the NRC. However, we believe federal financing opportunities will primarily benefit domestic large reactor developers whose designs have already been built in the US. Additionally, KEPCO’s expansion into the US market is limited by a January 2025 settlement with one of its main competitors over an intellectual property dispute, which includes a clause restricting the company from bidding for new projects in North America. Despite this lost opportunity, we believe KEPCO could still benefit by serving as another EPC option for American developers through its engineering and construction subsidiary.
Expanding Korean Presence in US Shipbuilding
A major priority for the South Korean government will be expanding the opportunities for the Korean shipbuilding industry. Korean firms have already made major inroads into US shipbuilding; Hanwha Systems and Hanwha Ocean purchased the Philly Shipyard in 2024 for $100 million and subsequently announced a $5 billion investment in the shipyard in 2025. These moves are tied to Korea’s strategic initiative to grow domestic industries that support national security, such as defense and shipbuilding. Despite billions of dollars in maritime industrial base funding, US shipyards have struggled to deliver ships on schedule and under budget. Meanwhile, South Korea has one of the most robust shipbuilding industries outside of China.
With initial success in entering the US shipbuilding market, South Korea will look to protect Hanwha and potentially accelerate orders. The FY27 budget request included over $65 billion for shipbuilding, over 50% more than was requested in FY26, but the largest growth area is in “non-battle force” auxiliary vessels, which is precisely the type of ships that Hanwha is looking to manufacture. This should not be a contentious issue as there is bipartisan support for shipbuilding in the US; any pushback that happens will likely be from members of Congress who represent some of the smaller shipyards, which might have to compete with Korean shipyards. However, the dire state of US shipbuilding creates substantial opportunities for greater US-Korea partnership, either at the government-to-government level or on a company-to-company basis, and there is enough work for both US and Korean firms, especially as Korean firms have a robust US presence.
Investment Outlook
US Likely to Pressure South Korea to Keep Pace with Japanese Investment Announcements
Capstone believes recent announcements by Japan that it has begun making investments it had promised as part of a deal it struck with the Trump administration have put pressure on the South Korean government to begin committing funds promised under its investment agreement. On February 17, 2026, the US and Japan announced over $35 billion of investments agreed to under that deal. On March 19, 2026, the US and Japan announced three more projects worth an additional $73 billion. The South Korean parliament likely saw these announcements and felt it was necessary to show progress in its own investment agreement, especially as US lawmakers have threatened South Korea over digital regulations on US firms.
The Trump administration places importance on announcing new investments to demonstrate the success of its trade policy. To set its pace with the $350 billion in investments planned by the end of President Trump’s term, South Korea should have already made pledges worth ~$50 billion. Trump administration officials will be sensitive to this lack of progress to date and will pressure South Korean officials to identify projects where the US can announce investments.
South Korea is concerned about the impact investing $350 billion will have on its currency and macroeconomic health, potentially complicating commitments under the deal. South Korean negotiators routinely emphasized this concern during negotiations, and as a consequence, the US agreed to allow South Korea to invest only up $20 billion per year. It is unclear how the $20 billion per year limit interacts with the $350 billion overall commitment as neither side has clarified how South Korea is supposed to allocate all $350 billion over the next 31 months of President Trump’s term at a $20 billion per year cadence.
US Process Will Run Through Commerce Secretary Lutnick’s Office
As with Japanese investments, the process for getting investments approved under the US-South Korea deal largely runs through Commerce Secretary Howard Lutnick’s office. This process will reward firms that have connections to Lutnick’s office, but disadvantage those who lack those connections. The US Investment Accelerator, which is meant to oversee implementation of investment commitments, lacks a robust structure, complicating the outlook for firms seeking to participate in the investment agreement.
There is a disconnect between the newly minted process in South Korea and the corresponding process in the US, which is highly personality-based. Consequently, firms may find it difficult to navigate the discordant processes between the US and South Korean governments. This will likely benefit firms in strategic sectors that are of interest to the US government, but will create uncertainty for firms that are unable to capture the attention of senior leadership at the Department of Commerce. Ultimately, the US-South Korea Investment agreement is best suited for firms that can navigate the informal US selection process and help the Trump administration demonstrate that it is helping reshore industry.
What’s Next
With South Korea’s formal investment process in place, investment announcements may materialize in the next six months.
Read more of Capstone’s Trade coverage:
The Tariff Pileup: Layered Policies, Rising Prices, and Growing Risks
