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Quartz Washington will take a Christmas Day break next week. We’ll be back in your inbox on New Year’s Day. President Donald Trump has reached preliminary trade deals this year that also set up government-backed investment funds from the European Union, Japan, and South Korea. All of those funds are in a state of limbo. The Trump administration has touted these investment funds as a critical piece of its plan to revive American manufacturing. Japan has pledged a $550 billion fund for new investments in the U.S. stretching into shipbuilding, artificial intelligence, semiconductors, and more. The European Union made a similar promise for its companies to invest at least $600 billion through 2029. The South Korean government likewise committed to a $350 billion investment fund. Yet several months after their announcement in precursor agreements, details are scarce and questions abound about the investments, which are supposed to total $1.5 trillion. It’s still unclear if the investment funds will actually materialize in the titanic sums described. “Most of the trade community is sort of waiting to see some actual projects that are announced before concluding that there's anything to these commitments,” said Tim Meyer, an international business law and trade professor at Duke University. “We don't really have any information on any detailed mechanics of how they're going to work, what the investments are, and so forth.” The White House does have one enforcement mechanism at its disposal. “We expect trade partners to abide by the commitments they voluntarily agreed to, and the President reserves the right to adjust tariffs if any party reneges,” a White House official told Quartz. | ||||||||||||||||||||||||||||||
The fogginess around the future of the investment funds extends even to senior Republican senators in Congress. “I think people are trying to be able to figure out how they're going to actually operate, what that would look like. So we just don't have enough information about it,” Oklahoma Sen. James Lankford told Quartz Washington. “I don't think everything's been inked fully on it.” “I just haven't heard anything, whether it's working or whether they're getting it or not,” said South Dakota Sen. Mike Rounds, a member of the Senate’s banking panel. “I haven't had any feedback.” Meyer, though, drew a parallel to a past Chinese pledge to step up U.S. soybean purchases in Trump’s first term as part of its “Phase One” trade agreement at the time. Those purchases never fully reached the specified targets. Current Chinese orders for American soybeans are also well below the commitments laid out in the interim, one-year agreement struck in late October. | ||||||||||||||||||||||||||||||
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A sovereign wealth fundOver the summer, Treasury Secretary Scott Bessent presented the funds as a step toward establishing a U.S. sovereign wealth fund, a state-controlled investment vehicle common in the Middle East and certain European countries such as Norway. “We have these agreements in place where the Japanese, the Koreans, and to some extent the Europeans will invest in companies and industries that we direct them largely at the President's discretion,” Bessent said in a Fox Business interview in August. He added: “Other countries, in essence, are providing us with a sovereign wealth fund.” Trump pursued an investment fund when he signed an executive order to set up a U.S. version shortly after taking office. In the E.U.’s case, the president was adamant in stating he’d oversee the selection process for which firms get the money. “The details are $600 billion to invest in anything I want. Anything,” Trump said in early August about the E.U.’s fund. European leaders in Brussels quickly downplayed the significance of their pledged spending spree. Instead, E.U. officials said the funds would come from private firms that they didn’t control nor could otherwise enforce. The money would be channeled towards “strategic sectors,” per an E.U. communique. For South Korea, one hangup has been the fund’s structure. Seoul is pushing to meet its commitment by issuing loan guarantees rather than direct capital, since it can’t match Japan’s economic might. The two sides still haven’t inked a final deal. Still, a South Korean initiative branded as “Make American Shipbuilding Great Again” has led to some domestic breakthroughs. In August, South Korean shipbuilding company Hanwha Group said it was spending $5 billion under the investment fund terms to build more docks and expand ship production at Hanwha Philly Shipyard. The company wants to ramp up shipbuilding capacity beyond one ship annually. Meanwhile, the Japanese government is still hammering out a profit-sharing agreement with the U.S. that ensures its companies can benefit from the investment spending, at least at the outset. Jessica Riedl, a budget expert at the Brookings Institution, noted that the Trump administration’s rhetoric around the success of its trade deals has been punctured by hyperbole. She said current administration claims of $18 trillion of total new investment from companies and foreign governments was almost two-thirds the size of annual U.S. economic output. “It's one thing for foreign governments and businesses to make offhand comments to the White House about investments in order to curry favor,” she said. “That's quite another thing for those investments to actually occur.” —Joseph Zeballos-Roig Joseph Zeballos-Roig is Quartz’s Washington Correspondent. Email him at jzeballos-roig@qz.com and follow him on X at @josephzeballos. | ||||||||||||||||||||||||||||||