Three Explanations for the Foreign Investment Pledges
In recent months, President Trump and the Trump administration have been touting a $20 trillion or so figure that they say foreign companies/governments have pledged to invest in the U.S. I've had trouble figuring out what to make of all this, but I have three theories that might explain what is going on, which I'll get to below after setting out a few specifics related to these pledges.
The investment pledges
The following are some of the more prominent foreign investment pledges that were made in the context of trade deal negotiations. This doesn't get us close to the $20 trillion figure, but it does represent a sizeable amount of investment.
EU:
The United States and the European Union share one of the world’s largest economic relationships, supported by mutual investment stocks exceeding $5 trillion, and intend to promote and facilitate mutual investments on both sides of the Atlantic. In this context, European companies are expected to invest an additional $600 billion across strategic sectors in the United States through 2028. This investment reflects the European Union’s strong commitment to the transatlantic partnership and its recognition of the United States as the most secure and innovative destination for foreign investment.
Japan will invest $550 billion directed by the United States to rebuild and expand core American industries.
...
At President Trump’s direction, these funds will be targeted toward the revitalization of America’s strategic industrial base, including:
Energy infrastructure and production, including LNG, advanced fuels, and grid modernization;
Semiconductor manufacturing and research, rebuilding U.S. capacity from design to fabrication;
Critical minerals mining, processing, and refining, ensuring access to essential inputs;
Pharmaceutical and medical production, ending U.S. dependence on foreign-made medicines and supplies;
Commercial and defense shipbuilding, including new yards and modernization of existing facilities.
The United States will retain 90% of the profits from this investment—ensuring that American workers, taxpayers, and communities reap the overwhelming share of the benefit.
Both leaders welcome Korean investments in various sectors to advance economic and national security interests, including but not limited to shipbuilding, energy, semiconductors, pharmaceuticals, critical minerals, and artificial intelligence/quantum computing.
This deal includes $150 billion of Korean investment in the shipbuilding sector approved by the United States, which is referred to as the Approved Investments.
This deal also includes $200 billion of additional Korean investment committed pursuant to the Memorandum of Understanding with respect to Strategic Investments (MOU), which is expected to be signed by representatives of the United States and ROK.
Under the President’s leadership, billions of dollars of investment by major Swiss companies such as Roche, Novartis, ABB, and Stadler have already been announced in connection with the Framework, with more on the way.
Swiss and Liechtenstein companies will invest at least $200 billion into the United States, with at least $67 billion worth of investment occurring in 2026.
Switzerland later provided some additional clarification:
Swiss companies operating in the USA have announced plans to invest at least $200 billion in US states over the next five years. These are preliminary announcements from the private sector and do not involve the public sector.
What might these foreign investment pledges mean?
It's not totally clear to me what's going on with these investment pledges, but I can imagine several different explanations.
Explanation #1: A lot of this new investment is actually going to happen
One very straightforward explanation is that the pledges – while aspirational to some extent – are being made in good faith, they represent new investments, and a fair amount of this investment is going to happen. The Trump administration made demands for foreign investment, and for whatever reason other governments are complying.
A problem with this theory is that it would be surprising if so many profitable investment opportunities had just been sitting there waiting to be taken advantage of but nobody was doing so, and suddenly investments are all going to come together because a U.S. administration demanded it. If there's a profit to be made somewhere, the private sector is usually pretty good at sniffing it out! And if, on the other hand, these investments aren't likely to be profitable, companies are going to be reluctant to undertake them.
Explanation #2: This is mostly just investment that would have happened anyway
Another explanation is that governments making these pledges are mostly just gathering together packages of investments that were already being planned. Along these lines, after his country's deal with the Trump administration was announced, Swiss Economy Minister Guy Parmelin said "he was 'satisfied' with the deal and argued that Swiss companies had been eyeing more U.S.-based production even before Trump." The language in the EU-U.S. joint statement quoted above also seems to reflect this idea.
Explanation #3: It's a delay tactic
A third explanation is that governments are doing and saying whatever they can to avoid being hit with higher tariffs now, in the hopes that at some point in the future the circumstances of their economic relations with the U.S. will improve and they won't have to follow through. Under this theory, the people making the pledges don't have much certainty about whether the investment is actually going to happen, but if making promises now can help in the short-term, they will make them. In terms of what might happen that creates the new circumstances, it is easy to imagine various political or economic crises in the U.S. that change the dynamics of presidential power and therefore the U.S. position in international economic relations, but I won't speculate here on the specifics.
Tracking the pledges
As I've said previously, I don't have the bandwidth to track how all these investments are going, but I assume others will, allowing us all to find out eventually what this foreign investment pledging really meant. A bit of investment here and there – such as South Korean investment in U.S. shipbuilding – wouldn't surprise me (although I'm not sure the tariffs were needed to make something like that happen). But the numbers being thrown around seem like a stretch, and it will be interesting to see what the reality is like.