President Donald Trump has long wanted the United States to establish a sovereign wealth fund – a powerful pool of investment capital directed by the president to reshape the economy and generate long-term national wealth. With a new $550 billion commitment from Japan, that ambition may be closer to reality than ever before.
Though the money is coming from the Japanese government and not U.S. reserves, Trump’s administration is treating it as a de facto sovereign wealth fund. “This is literally the Japanese government giving Trump $550 billion and says, ‘Go fix whatever you need to fix,’” said Commerce Secretary Howard Lutnick, who helped negotiate the deal. The agreement gives Trump near-total control over how the funds are invested, with 90 percent of any profits going to the U.S. Treasury.
What Is a Sovereign Wealth Fund?
A sovereign wealth fund is a state-owned investment portfolio, typically financed through trade surpluses or natural resource revenues. Countries like Norway, Saudi Arabia, and Singapore have used such funds to invest in infrastructure, technology, energy, and other long-term priorities. The goal is to grow national wealth while securing financial independence.
The United States has never had a sovereign wealth fund, largely due to its persistent budget deficits. Trump proposed the idea during his campaign and signed an executive order in February 2025 to explore how such a fund could be created. At the time, he said, “In a short period of time, we’d have one of the biggest funds. We’re going to create a lot of wealth for the fund.”
The plan stalled without a clear funding source. But now, Trump is positioning Japan’s pledge as the breakthrough he was waiting for.
How the Japan Fund Works
The $550 billion investment is part of a broader trade agreement between the United States and Japan. According to the White House, the funds will be directed into key U.S. industries such as semiconductor manufacturing, energy, shipbuilding, pharmaceuticals, and critical minerals. The structure will include equity investments, loans, and loan guarantees—all standard tools for sovereign wealth operations.
Two Japanese government institutions—the Japan Bank for International Cooperation and Nippon Export and Investment Insurance—will oversee Japan’s side of the fund. But on the U.S. side, Trump will decide where the money goes, assisted by the Commerce Department’s new U.S. Investment Accelerator.
“This is a Japanese government commitment,” said Senator Bill Hagerty, a former ambassador to Japan. “This is separate from all of that,” he added, referring to existing private-sector efforts like SoftBank’s $500 billion AI initiative.
An administration official gave an example: the fund could pay to build a semiconductor facility for Intel, lease it to the company, and keep 90 percent of the leasing profits. Another example involved purchasing a mine and contracting a company like Rio Tinto to operate it.
While foreign investment pledges are common in trade deals, this one stands out because of how it centralizes control. Harvard professor Christina Davis called it “unprecedented,” saying, “It makes it sound coercive, socialist and unprecedented in any sense of past trade negotiations.”
Douglas Irwin, a trade historian at Dartmouth, said this kind of direct presidential involvement in investment strategy has no modern comparison. “Previous presidents encouraged foreign investment,” he said, “but they never demanded to control how that money would be spent.”
A Strategic Masterstroke?
The Trump administration believes this deal will generate jobs, rebuild domestic manufacturing, and reduce U.S. dependence on foreign supply chains. “This is the single-largest foreign investment commitment ever secured by any country,” the White House said in a statement. “It will generate hundreds of thousands of U.S. jobs, expand domestic manufacturing and secure American prosperity for generations.”
Trump has called the money a “signing bonus” for negotiating with the United States. For other countries that refused to deal, he warned, “the United States would impose a straight simple tariff of 15 to 50 percent.”
Karoline Leavitt, White House press secretary, said the fund is the “centerpiece” of the trade deal. “The funds would be spent at President Trump’s discretion and direction into key industries,” she said.
Critics Warn of Political Risk
Others are deeply skeptical. Veronique de Rugy, a fellow at the Mercatus Center, called the plan “the kind of fantastical claims better suited for a campaign rally than a serious trade announcement.” She said that while foreign companies have invested in the U.S. for decades, what is new here is “the overt linkage” between foreign policy and politically directed investment.
“It suggests a vision of economic policy where the president plays matchmaker between foreign investors and domestic industries based on political priorities,” she added. “That’s not just unseemly. It erodes the very idea of a free-market economy.”
Economist Paul Krugman also criticized the deal. He said more foreign investment means a stronger dollar and a larger trade deficit, not a smaller one. “It’s not a theory, it’s just accounting,” he said.
Still Just a Framework
For now, the Japan fund remains an agreement in principle. Hagerty acknowledged the deal has not been fully finalized. “These deals have been agreed in principle, but they have not been fully papered yet,” he said. The Japanese government still faces political and budgetary constraints, and it remains to be seen how much money will actually be deployed.
Even so, Trump’s team sees this as a turning point. The fund may not be officially American, but it gives Trump what he always wanted—control over a massive investment engine to reshape the U.S. economy.
“We got a $550 billion signing bonus for the country,” Trump said this week.
Whether this is the birth of an American-style sovereign wealth fund or just a flashy campaign talking point remains to be seen. But one thing is clear: the idea is no longer theoretical. It now has dollars behind it.
