A closely watched piece of a trade deal announced with Japan this past week is a plan for a “new Japanese/USA investment vehicle” that Trump and his team said will put $550 billion aside for the president to personally deploy to finance new investments in the US.
Observers are watching this unusual provision closely amid a growing expectation it will serve as a template of sorts for remaining trade talks — even as conflicts grow over exactly what was agreed to, especially a disagreement on how profits might be split.
It’s just one of the questions that cropped up immediately after the president’s announcement Tuesday — and appears to have only grown in the days since.
Trump and his team have deployed a range of metaphors to describe this part of the deal, from a “signing bonus for the country” (Trump) to a “national security sovereign fund” (Commerce Secretary Howard Lutnick) to a “blank check” (trade adviser Peter Navarro).
The Japanese are describing things very differently, suggesting that the provision is more akin to a non-legally binding agreement to look for joint investment opportunities for both US and Japanese companies.
“There are a lot of details that need to be worked out here,” former trade negotiator Wendy Cutler, now at the Asia Society Policy Institute, noted on Yahoo Finance on Friday.
She added that the very different accounts from different sides at the very least “does not bode well for smooth implementation.”
Yet the bumpiness has done little to slow momentum for the idea in Trump’s orbit, with a sense that similar provisions could be part of any possible deal with South Korea and perhaps Taiwan.
Trump also appeared to suggest Friday that it may be what’s needed to close a deal with the European Union.
As he left for Scotland, the president described a deal with the EU as far from a sure thing, adding that what might push talks over the line is a pact “where they buy down their tariffs.”
Trump officials, for their part, stand by their side’s version of the deal with Japan and often note they have an easy way to make sure things work out to their liking: the constant threat of re-raising tariffs.
A White House spokesperson declined to offer further details Friday on exactly how the investment vehicle would work and what Trump meant with Friday’s comments around EU negotiations, which are set to continue this Sunday while the president is in Scotland.
Read more: What Trump’s tariffs mean for the economy and your wallet
‘Hardly the operation of the free market’
What is known about the investment portion of the deal has come under growing criticism. Iain Murray, a vice president at the Competitive Enterprise Institute, called the outline “hardly the operation of the free market in action.”
He added that the government-run process to direct funds could quickly become messy, with “all the usual problems of state-directed, industrial policy.”
This piece of the deal was one that was clearly hammered out quickly and late in the negotiating process.
A social media post by White House deputy chief of staff Dan Scavino earlier this week showed the president sitting across from Japan’s chief negotiator Ryosei Akazawa. Before him was a paper outlining the deal, with $400 billion crossed out and replaced in pen with $500 billion.
The final agreement of $550 billion was then subsequently announced.
The full text of the trade agreement has not been released, but a White House fact sheet describes the plan as for “a new Japanese/USA investment vehicle” that will be “over $550 billion.”
“At President Trump’s direction, these funds will be targeted toward the revitalization of America’s strategic industrial base,” the document adds, listing energy, semiconductors, critical minerals, pharmaceuticals, and shipbuilding as the five areas of focus.
It’s a provision Trump has likened to “a $550 billion signing bonus for the country,” adding of the money, “We control the whole lot of it and it’s really been great.”
Lutnick has gone further and described this part of the deal as “literally the government of Japan givingDonald Trump and the American people $550 billion to invest, at his direction, on things that are important to America and national security.”
Mounting disagreements around the deal
The Japanese appear to disagree fundamentally. Japan’s top trade negotiator told Reuters this week that “some people are saying Japan is simply handing over $550 billion, but such claims are completely off the mark.”
It all could complicate the overall pact that is set to reduce “reciprocal” and automotive tariffs on Japanese imports to the US from previously threatened levels of 25% to 15%.
Murray of the Competitive Enterprise Institute added that the deal, depending on how much power the president ultimately has to direct funds, “has all the sorts of things that the founders were worried about about presidential power: the power of patronage, the capacity for corruption.”
It all adds up to a potential “end run around constitutional checks and balances,” according to Murray.
And as financial writer James Surowiecki put it on social media: “Trump and his people are pure, top-down central planners. They’re just convinced they can allocate capital better than the market.”
Ben Werschkul is a Washington correspondent for Yahoo Finance.
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