President Trump is taking steps to overhaul the way the U.S. government invests its money and change the nature of America’s financial presence abroad.
The president signed an executive order Monday that kicked off the process of creating a sovereign wealth fund with the goal of generating more revenue for the government.
Trump also suggested the fund could be used to purchase TikTok — the popular video-sharing app subject to a ban if it is not spun off from ByteDance, its China-based parent company.
A sovereign wealth fund would be a significant shift from the U.S.’s approach to foreign investment, and Trump’s order raises myriad questions about how it would work.
But the prevalence of state wealth funds and bipartisan interest in a federal version give the Trump administration a path forward.
Here are five things to know about Trump’s plan for a sovereign wealth fund.
What is a sovereign wealth fund?
Sovereign wealth funds are investment funds created by national governments, usually to manage state-owned assets. Such funds are often financed by major federal revenue surpluses, often generated by the state’s natural resources or other windfalls, according to experts at the Center for Global Development (CGD).
Norway and several Persian Gulf states, such as Saudi Arabia, operate sovereign wealth funds fueled by oil and gas revenue. China’s is funded primarily through the steep trade surplus it runs with other nations, which brings in plenty of higher-valued foreign currency for Beijing to deploy.
Sovereign wealth funds can be used for a wide range of goals, CGD noted, such as stabilizing prices or funding domestic policy goals. Other funds operate more like traditional investment funds and focus primarily on lucrative or strategic investments abroad.
Saudi Arabia drew backlash from some lawmakers and sports fans after its Public Investment Fund struck a deal with the PGA Tour — an investment both in the massive U.S. sports market as well as in improving the kingdom’s image within the U.S.
While there is not yet a U.S. sovereign wealth fund, CGD noted that 21 states have their own versions of wealth funds — the largest of which are funded through natural resources revenue and used to fund education and other state operations.
Why does Trump think the US needs one?
Trump backed the idea as a way to create more wealth within the U.S. amid his administration’s plans to extend tax cuts, loosen financial regulation and drastically cut the size of the federal government.
“It’s a very exciting event. We’re going to have a sovereign wealth fund, which we’ve never had,” the president said Monday. “We have a lot of things that create wealth, and you’re seeing that over the last two weeks, I think we’ve created more wealth.”
But Trump also said the wealth fund could be used to purchase a controlling stake in TikTok, which could preserve the app and wrest it from the control of a Chinese company.
The president suggested last month that the U.S. could participate in a joint venture to acquire TikTok and prevent the app from being banned under a law signed by former President Biden.
“TikTok — we’re going to be doing something, perhaps, with TikTok, and perhaps not, if we make the right deal we’ll do it, otherwise we won’t, but I have the right to do that,” Trump said. “And we might put that in the sovereign wealth fund, whatever will make. Or if we do a partnership with very wealthy people. A lot of options, but we could put that as an example of the fund.”
A sovereign wealth fund could be among the cleanest ways of giving the U.S. a stake in the company without nationalizing it.
There is bipartisan interest in creating a US sovereign wealth fund
While Democrats may be wary of doing anything with the Trump administration amid its purges of USAID and the FBI, attempts to access the Treasury Department payment system and efforts to slash the federal workforce, the idea of a U.S. sovereign wealth fund has bipartisan backing.
Top Biden administration national security officials had been working on a plan to create a fund focused on investing in supply chains and energy infrastructure, according to the New York Times.
Rep. Morgan McGarvey (D-W.V.) also introduced a bill last year to explore the creation of a U.S. sovereign wealth fund.
“Americans deserve a government that doesn’t just lead in the 21st century but plans for the 22nd century,” said McGarvey said in a September statement unveiling the bill.
“We should consider every potential tool to help ensure the United States remains competitive and meets future challenges.”
How the US currently invests abroad
Most U.S. investment abroad is conducted through the U.S. Development Finance Corp. (DFC), an independent agency created through a 2018 merger of two other federal offices.
DFC focuses primarily on development projects abroad with the overall goal of improving economic or medical conditions in targeted countries while generating revenue in the process.
DFC can also offer a variety of financing options, such as loans and insurance, to development projects abroad.
Elon Musk has reportedly explored turning DFC into a sovereign wealth fund and expanding on the infrastructure already created by Trump during his first term. But experts at CGD warn that the current fund is too small to compete with sovereign wealth funds and should remain focused on its own mission.
“We fully expect US strategic interests abroad to move up the proverbial priority list under the Trump administration, much as the agency was urged to go big on climate finance under President Biden. But there’s a risk of setting too many objectives and unrealistic goals that could swamp a still-young agency,” CGD experts Clemence Landers, Erin Collinson and Justin Hurley wrote in a January analysis.
“What gets lost in the mix is the economic development mission that the institution was created to pursue—and the history that argues straying too far from its core directives could spell danger for a recent bipartisan policy win.”
Where does the money come from?
The U.S. has no shortage of financial firepower. The dollar has held strong as the world’s reserve currency, U.S. capital markets have remained stable for nearly two decades and trillions of dollars in Treasury bonds underpin the global financial system.
But the U.S. lacks an essential component of any sovereign wealth fund: lots and lots of cash.
The Treasury Department is currently undertaking extraordinary measures to prevent the U.S. from defaulting on more than $36 trillion in debt. The U.S. does not appear to be anywhere close to turning a budget surplus anytime soon, which means the government must use its cash toward paying debts as they come due.
Trump has floated funding a sovereign wealth fund with tariffs, and Treasury Secretary Scott Bessent said Monday the U.S. “would monetize the asset side” of the federal balance sheet without explaining what that would entail.
“No comparable revenue streams at the federal level could be realistically used to capitalize” a sovereign wealth fund, the CGD experts wrote.
“Given the United States track record, a proposal that relies on hypothetical future budget surpluses is unrealistic.”
