Trump Is Using Tariffs to Snag Trillions in U.S. Investments. Is It for Real?

President Donald Trump’s trade deals have often included promises of U.S. investment from trade partners. (Anna Moneymaker/Getty Images)

President Donald Trump has touted major trade partners’ pledges to invest billions in the U.S. as a win for his fluctuating tariff policy. But trade experts say these commitments leave more questions than answers.

For starters, it isn’t clear how the U.S. can enforce these deals, and even what form they will take.

The president has repeatedly said the U.S. is now bringing trillions in investment. Heads of state and corporate executives have visited the White House bearing promises of massive investments, such as Saudi Arabia’s $600 billion commitment and a $1.4 trillion pledge from the United Arab Emirates.

More recently, Trump has said countries are able to “buy down” their tariff rates by committing to invest in the U.S. or buy American goods, or both. For example, he threatened 25% tariffs on South Korea last week, but said they could perhaps “buy them down.” Hours later, the White House announced a pact with the country, that included 15% tariffs on its imports and a pledge by Korea to invest $350 billion.

But analysts and veteran trade experts note that investment pledges—as well as commitments to buy U.S. goods—haven’t lived up to expectations in the past. Most famously, China didn’t meet the agricultural purchase commitments in the Phase One trade deal that Trump struck during his first term.

In the latest batch of commitments, a slew of details are missing—most notably, what mechanisms will be used to facilitate the agreements and how the U.S. can enforce them, if at all. For example, analysts say U.S. trading partners can’t force private-sector companies to invest.

Here, the European Union deal is a telling example. A spokesman for the EU told Barron’s that the $600 billion investment part of its trade agreement was a “nonbinding commitment” on the bloc’s estimated investment in the U.S. That estimate is based on the Commission’s outreach to industries and economic sectors to understand their investment intentions in the U.S. in coming years.

Even the amounts pledged are murky. It isn’t clear whether previously announced investments—including those made during the Biden administration, like Samsung’s multibillion-dollar plans to invest in Texas chip manufacturing—are part of Trump’s announced investment totals.

And then there are the actual terms of these investments. In an interview Tuesday on CNBC, Trump likened them to a signing bonus: “That is our money to invest as we like.”

When asked what would happen if the trading partners don’t make the investments they committed, Trump said they would pay higher tariffs. “They [The European Union] bought down the tariffs from 30% to 15%. That’s a gift, not a loan,” he told CNBC, adding he could invest in anything he wants.

But others, like Japan, have pushed back on the characterization of their pledges. The White House fact sheet detailing the preliminary agreement between the two countries included a $550 billion investment fund aimed at critical sectors in the U.S., including building energy infrastructure, shipping, shoring up chips, and pharmaceutical manufacturing domestically. Trump said the investment was at his discretion, with 90% of the profits going to the U.S.

Japan, meanwhile, has said the fund will be a mix of equity, loans, and loan guarantees to the U.S.—with the majority of it in loans. Analysts are unclear how 90% of the profits would accrue to the U.S.

Japan’s top trade negotiator has said he is planning to return to Washington, D.C. this week to push the U.S. to reduce auto tariffs to 15%—as outlined in last week’s preliminary agreement—from 25%, and to flesh out the pact.

“This is what these trading partners have agreed to, and the president reserves the right to adjust tariff rates if any party reneges on their commitments,” a White House official told Barron’s on Tuesday, referring to the fact sheets of the EU and Japan deals.

To trade watchers, these investment pledges bear some similarity to the Inflation Reduction Act and so-called Chips Act passed under the Biden administration to shore up supply chains and domestic manufacturing in critical sectors. But there are some big differences: Congress passed the IRA and Chips Act, so those investments were never at the discretion of the president, while Trump says these new investment commitments are.

“The line between industrial and trade policy is getting blurred,” says Marc Busch, an international trade and law expert who previously advised the Commerce Department and the U.S. Trade Representative’s office and now teaches at Georgetown University.

“‘At my discretion’ could mean that Trump, not the market, determines where the funds are going,” Busch says. “That could mean the money doesn’t go where it’s needed, but where it pays political dividends—that has always been the fear of industrial policy, under anyone’s watch.”

Furthermore, trade veterans note that these investments could take a while—even years—to begin bearing fruit.

In the interim, foreign companies committing billions will want stability in U.S. policies, and likely would only follow through with that spending if it makes commercial and financial sense. Yet, there is little clarity on how policies could shift—not just in the next administration, but within this one.

Write to Reshma Kapadia at reshma.kapadia@barrons.com