Former President Donald Trump is right when he says that foreign investment pledges of $600 billion should not be treated as gifts. His statement was met with disbelief by trade partners. In the course of that discussion, Trump pointed to other comments made by an unnamed White House staffer. These deals have come a long way, the official said. He stressed that these investments would enable access to more transformative economic opportunities across several categories.
Trump’s statements came on the heels of trade deal announcements with Japan, the European Union (EU), and South Korea. He followed up to explain that Japan’s commitment is head snapping $550 billion in investments, which he referred to as “seed money.” At the same time, South Korea committed to invest $350 billion in the United States. Next, the EU will buy more U.S. liquefied natural gas, oil, and nuclear energy products. This agreement is estimated to be valued at $750 billion over the next three years.
Trade officials from Japan and the EU have made accurate short work of Trump’s characterizations. While most countries just give cash, Ryosei Akazawa, Japan’s most senior official involved in implementing the deal, insists that this is not true. For one, he claims these statements are “100% wrong.” He made clear that the agreement consists of both direct investment and loan guarantees to help achieve the tariff reductions.
In addition to the investment figures, Trump noted that he reduced tariffs on imports from Japan from 30% to 15%, attributing this reduction to the financial commitments made by Japan.
“They brought down their tariffs, so they paid $600 billion and because of that, I reduced their tariffs from 30% down to 15%” – Donald Trump.
On its part, the White House published an accompanying fact sheet detailing the EU’s far-reaching ambitions. They pledge to buy $750 billion U.S. renewable energy and invest $600 billion more by 2028. As experts warn, these pledges and commitments are not set in stone.
As trade analyst David Kleimann pointed out, that makes for the tentative quality of these agreements.
“That’s why these commitments are – and can only be – merely aspirational” – David Kleimann.
Choi Seok-young, South Korea’s chief negotiator, admitted there were already gaps in how to structure the proposed $350 billion joint investment fund. He underscored the importance of continued alignment between Seoul and Washington.
“There are still gaps between Seoul and Washington in how to structure the $350 billion joint investment fund” – Choi Seok-young.
As much as Trump would like to frame these foreign investments as cash handouts from benevolent governments, this likely isn’t the case. The European Commission stated that it only noted an “interest” from European companies in investing at least $600 billion in the United States.
Trump mused that the tariffs on pharmaceuticals should even be raised to 250%. He previewed a new approach to semiconductor tariffs, which he anticipates rolling out in the near future.
“They gave me $600 billion, and that’s a gift.”
“They gave us $600 billion that we can invest in anything we want.” – Donald Trump.
As debates over these costly trade deals continue, both sides need to be at the negotiating table. If so, they must negotiate terms that suit their bottom line. The difference between pledges and real, concrete investments will certainly be a key issue in future negotiations.
As discussions surrounding these trade deals evolve, it remains clear that both parties will need to negotiate terms that satisfy their respective economic interests. The distinction between pledges and actual investments will likely continue to be a focal point in future negotiations.