Trump's Trade Deals Have One Giant Contradiction

A focus on correcting trade imbalances is wrongheaded. The goal should be to boost foreign investments.

- Rebecca Patterson

As the dust — perhaps — starts to settle after four frenetic months of trade negotiations, the biggest win for America might be a potential windfall of investment from overseas.

In an effort to avoid even higher tariffs, Japan, the European Union and South Korea have loosely pledged to directly invest a total of US$1.5 trillion (S$1.93 trillion) in the United States, equivalent to what the US government spent on social security benefits in 2024.

We don't know exactly when the money will arrive, or if some of it simply replaces investments that might have happened anyway. Even with a healthy haircut, the pledges sound impressive, and could be greater than the new global direct investment in the US over the past six years.

THE IMPORTANCE OF FOREIGN INVESTMENTS Well before US President Donald Trump's deal-making, what's officially known as foreign direct investment has played an increasingly important role in America's economy. Today, it accounts for about one in 10 American jobs and more than 16 per cent of all US manufacturing jobs.

It brings technology and expertise (think semiconductor facilities in Arizona courtesy of Taiwan) and supports American innovation, accounting for nearly 16 per cent of US corporate research and development.

And, in contrast to fickle stock and bond flows, this capital is sticky; most projects involve multi-year investments that provide a consistent boost to local economies.