A great first in the United States. Between a few projections on the imposition of new customs tariffs on its business partners, Donald Trump has found time to make another shock announcement. Monday, February 3, the new American president signed a decree allowing Washington to launch a sovereign fund in the coming months. This device, for the moment mainly used by emerging countries or with important natural resources, could participate in the acquisition of Tiktok across the Atlantic.
The idea is not new: the Biden administration was already reflecting to set up such a sovereign fund before Donald Trump’s victory in the last presidential election. But this time, the billionaire seems to be determined to materialize the initiative, which he said could finance “major national projects” in the country. What are the challenges of such a measure? Why can a nation have recourse to a sovereign fund? Decryption.
What is a sovereign fund?
This type of system is not necessarily very well known in Europe. However, the functioning of a sovereign fund is quite simple. It is in fact an investment fund directly linked to a state. The objective? Take advantage of the excess of the country’s economy to place this money in various interests – then make this money grow. This can go through stock market investments, investments in companies – including foreign – or even interesting purchases in real estate.
By giving off additional profits through their investments, states can then use them to finance all kinds of projects. Another advantage: this money constitutes an important financial windfall to protect the economy of its country and its citizens in the event of unforeseen markets on the markets. A stabilization role that has already served to provide resources to certain Western banks in order at the start of the crisis of subprimein 2008.
The financing of a fund itself differs depending on the country. Like the first sovereign fund, created in 1953 in Kuwait, many Gulf diets have set up such devices to make their yields perceived thanks to hydrocarbons, including oil. Trade surpluses represent the other main source of food for sovereign funds in the world, especially in Asian countries.
What does Donald Trump announced precisely?
The desire to create a sovereign fund in the United States, long reluctant to this type of system, once again indicates the will of Donald Trump to “enrich” the Americans, as repeated in recent weeks. He suggested that the taxation of new customs duties could participate in finance this new sovereign fund. For him, this cash register could even be used for a possible purchase of Tiktok, forced by the United States to separate from its Chinese parent company Bytedance. “We could place this money in the sovereign fund, whatever it is, or if we establish a partnership with very wealthy people,” said Donald Trump.
If the vision of the American president seems in the imprecise matter, the American secretary of the treasury, Scott Bessent, gave some lean information on the deadlines to come before the launch of such a fund. “We will set up this plan in the next 12 months,” he promised, at a press conference. “It will be a combination of liquid assets, assets that we have in this country, as we make sure to make them available to the American people.”
On the other hand, as reported by CNBCthe executive decree allowing the creation of the fund details the objectives of the latter more. Thus, according to this document, the American sovereign fund will be aimed at “promoting budgetary sustainability, lightening the tax burden of families and small American businesses, establishing economic security for future generations and promoting economic leadership and strategic United States internationally “.
The fact remains that the contours of its financing system, at the moment when the United States remains largely in deficit, appear for the moment very vague. Several experts from the Center for Global Development, a Think Tank based in Washington and London, estimated in a summary published on January 27 that such a proposal was risky. “No federal income flow could be used realistically to capitalize” this type of sovereign fund in the United States, believe the three researchers Clemence Landers, Erin Collinson and Justin Hurley. “Given the results of the United States, a proposal based on hypothetical future budgetary surpluses is unrealistic.”
What countries do a sovereign fund today have?
Several dozen countries have one or more sovereign funds. The most important thing in the world is that of Norway, the Fund-Global Government pension, whose investments generated record gains in 2024. Indeed, 214 billion euros were earned from this mechanism, which draws from the country’s oil income in order to invest in capital. This splendid year for the Norwegian fund is explained by the nature of its investments. The Scandinavian state thus has shares in several tech giants, such as Apple, Microsoft, Amazon, Tesla or Meta. Successful companies that allow him to acquire an advantageous return on investment.
In the Middle East, Saudi Arabia also has a wealthy sovereign fund, there also fueled thanks to the hydrocarbon trade. This tool, the Public Investment Fund (PIF), is a central element of the petromonarchy development strategy. The country has indeed intended for years diversifying its income beyond the oil rent. Example among so many others: this fund has allowed the financing of a much more competitive football championship for a few years, with the arrival in this league of players at international stature, such as the fivefold Portuguese Golden Ball Cristiano Ronaldo or the ex-star of PSG Neymar.
China, Singapore, New Zealand, United Arab Emirates, Qatar, Malaysia, Oman … Many states therefore have sovereign funds. In 2023, all of these devices had reached a total of $ 13,000 billion in the world, a figure up 14 % compared to the previous year, According to a report from the IE University of Ségovia (Spain) produced in partnership with Icex-Invest. According to this study, the investments of these sovereign funds are increasingly heading towards countries in the South, especially towards India.