Summary

  • Gregory Auclair and Adnan Mazarei identify structural features in foreign investment pledges to the United States that predict underdelivery and obscure actual capital flows.
  • The Trump administration substituted tariff-leveraged foreign pledges for direct fiscal outlays, shifting project-selection opacity from domestic agencies to opaque bilateral arrangements.
  • The European Union, Saudi Arabia, the United Arab Emirates, and Qatar face structural and financial constraints that reduce the probability of meeting their nonbinding investment targets.
  • An impending Supreme Court ruling on tariff legality introduces a critical variable that could collapse the bargaining foundation or preserve it under alternative legal authorities.

Gregory Auclair and Adnan Mazarei of the Peterson Institute for International Economics examined 2025 investment pledges from the European Union, Japan, South Korea, Taiwan, Switzerland, Liechtenstein, Saudi Arabia, Qatar, Bahrain, and the United Arab Emirates, concluding that the commitments are “clouded with uncertainty.” The researchers identified structural features of the pledges—specifically their nonbinding nature, undefined time horizons, and vague verification metrics—as predictive of underdelivery. This assessment follows the Trump administration’s use of punitive tariff threats to extract these concessions, substituting tariff-leveraged foreign capital for the direct taxpayer-funded industrial policy utilized during the Biden administration. The arrangement introduces significant variables, including conflicting official tallies of the pledged amounts, the financial capacity of Gulf states to meet their obligations, and an impending Supreme Court review of the tariffs’ legal foundation.

Conflicting official tallies and verification metrics

The scale of the investment pledges varies across official accounts by a factor of more than three. Gregory Auclair and Adnan Mazarei tallied $5 trillion in pledges from the major trading partners examined. The White House published a figure of $9.6 trillion, which includes both public and private commitments. Donald Trump has claimed pledges as high as $17 trillion or $18 trillion, though the researchers note the basis for his claim is not clear.

For context, total private investment in the United States was running at a $5.4 trillion annual pace, and total foreign direct investment in the United States amounted to $151 billion in 2024, the last year for which figures are available. Adnan Mazarei, a former deputy director of the International Monetary Fund, characterized the agreements as having been reached “under duress,” adding, “It’s not necessarily being done willingly.”

Structural features and financial constraints

The researchers identified specific structural features of the pledges that are predictive of underdelivery. The European Union’s commitment to invest $600 billion in the United States “carries no legally binding commitment.” Time horizons for the pledges vary, and the metrics for verifying them are “generally unclear.”

For the Gulf states, the pledges present particular challenges relative to their financial resources. Saudi Arabia appears capable of meeting its targets “with some difficulty.” The United Arab Emirates and Qatar would find meeting their pledges even harder and might have to finance the investments through borrowing. The researchers wrote that in all three Gulf cases, “the commitments are nonbinding, and investments from these countries could fall well below headline numbers.”

Policy substitution and bargaining leverage

The bargaining arrangement documented in the reporting pairs United States-side punitive tariff threats with counterparty pledges of specified investment dollar figures. The tariff threat produced the documented 2025 concessions, while the trading partners’ pledges remain nonbinding, lack verification, and in several cases exceed the pledging parties’ documented financial capacity.

The Trump administration substituted this tariff-leveraged foreign pledge model for the direct fiscal outlays used during the Biden administration. While the Biden administration used taxpayer dollars to finance infrastructure projects and incentives for companies to invest in green technology and semiconductors, the Trump administration is using tariff threats to have foreign countries and their companies pick up the tab, and has dropped the push to encourage clean energy in favor of promoting fossil fuels.

The researchers assessed that this approach “may yield real investments and jobs,” but it carries “familiar industrial policy concerns: opaque project selection, weak accountability, and the risk that political criteria crowd out economic efficiency.” The substitution trades fiscal cost for bargaining leverage and partner-compliance uncertainty, and shifts the locus of project-selection opacity from United States agencies to bilateral arrangements with foreign counterparts. White House spokesman Kush Desai stated that President Trump “reserves the right to revisit tariff rates if other countries renege on their commitments,” establishing a documented escalation pathway, and the administration treats alternative tariff authorities as a backup policy option.

The legal foundation of the tariff threat is currently under review, with the Supreme Court expected to rule as early as February on whether the tariffs are legal. Predetermined elements across all scenarios include current tariff rates remaining in place, the conclusion or imminence of the Supreme Court review, and the pledges themselves remaining on the public record. The critical uncertainties are the Court’s ruling and whether trading partners will honor nonbinding commitments if the legal foundation of the threat collapses.

If the Court upholds the tariffs, the trajectory depends on partner compliance. Where partners honor the pledges, partial realization is plausible but slow, with leading indicators including project announcements, United States-side permitting activity, and partial capital flows. Where partners underperform, leading indicators would include explicit partner statements questioning commitment scope and delayed project announcements. Trading partners face continuing pressure to deliver but retain discretion over the actual pace because the terms are loose.

If the Court strikes down the tariffs, the legal foundation for the leverage collapses. Where the administration deploys alternative tariff authorities, which the reporting notes is available, the bargaining resets under a new legal basis. Where alternatives fail to materialize effectively, trading partners are positioned to withdraw their pledges, and United States foreign direct investment returns toward the 2024 baseline of $151 billion. Partners gain bargaining space to renegotiate or exit without facing the threatened consequence that produced the pledges.

An external shock, such as a global recession or a sharp drop in Gulf state energy revenues, could prevent foreign governments and sovereign wealth funds from deploying capital abroad regardless of tariff legal status. In this scenario, the absence of available foreign liquidity becomes the binding constraint, secondary to the legal status of the tariffs.

Analytical techniques used in this piece

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