They looked at more than $5 trillion in investment commitments made last year by the European Union, Japan, South Korea, Taiwan, Switzerland, Liechtenstein and the Persian Gulf states of Saudi Arabia, Qatar, Bahrain and the United Arab Emirates.
Trump used the threat of punitive tariffs – import taxes – to pry concessions out of those trading partners, including the investment pledges.
The White House has published an even higher investment figure - $9.6 trillion – that includes public and private investment commitments from other countries. Trump himself, never one to undersell his achievements, has put the number far higher -- $17 trillion or $18 trillion -- though Auclair and Mazarei note that “the basis for his claim is not clear.’’
All the numbers are huge. Total private investment in the United States was most recently running at a $5.4 trillion annual pace. In 2024, the last year for which figures are available, total foreign direct investment in the United States amounted to $151 billion. Direct investment includes money sunk into such things as factories and offices but not financial investments like stocks and bonds.
“The pledged amounts are large,’’ Auclair and Mazarei write, “but their time horizon varies, and the metrics for measuring and thus verifying the pledges are generally unclear.’’ They note, for example, that the European Union’s pledge to invest $600 billion in the United States “carries no legally binding commitment.’’
The report also finds that some countries would strain to meet their pledges. For the Gulf countries, “the commitments are large relative to their financial resources,” the researchers write.
“Saudi Arabia appears capable of meeting its targets, with some difficulty.’’ The United Arab Emirates and Qatar would find it even harder and might have to finance the investments by borrowing. “In all three cases, the commitments are nonbinding, and investments from these countries could fall well below headline numbers,’’ they write.
Moreover, “these agreements have been reached under duress,’’ Mazarei, a former deputy director of the International Monetary Fund, said in an interview. “It’s not necessarily being done willingly.’’
So trading partners could look for ways to escape their commitments – especially if the Supreme Court strikes down the tariffs Trump used to negotiate the one-sided agreements. A ruling is expected as early as February. “Other countries may find a way to wiggle out,’’ Mazarei said.
Still, the Trump administration can turn to alternative tariffs if the justices rule the current tariffs illegal.
“President Trump agreed to lower tariffs on countries we have trade deals with in exchange for investment commitments and other concessions,’’ White House spokesman Kush Desai said. “The president reserves the right to revisit tariff rates if other countries renege on their commitments, and anyone who doubts President Trump’s willingness to put his money where his mouth is should ask Nicolas Maduro and Iran for their thoughts.”
U.S. troops overthrew and arrested Venezuelan President Maduro early this month, and Trump ordered the United States to join Israel in bombing Iran last year.
Auclair and Mazarei agree that the investment Trump lands could end up creating jobs, spurring economic growth and making supply chains more secure by bringing production to America.
Trump, they note, is in some ways taking a similar approach to Biden, using government “industrial policy’’ to encourage more manufacturing in the United States.
But Biden tapped taxpayer dollars to finance infrastructure projects and incentives for companies to invest in green technology and semiconductors. Trump is using the tariff threat to get foreign countries – and their companies – to pick up the tab. And he has dropped the push to encourage clean energy, focusing instead on promoting fossil fuels.
In their report, the Peterson researchers worry about how the investment decisions would get made and whether they would reflect sound economics. “This approach may yield real investments and jobs,’’ they write, “but it raises familiar industrial policy concerns: opaque projection selection, weak accountability, and the risk that political criteria crowd out economic efficiency.’’