Trump’s sovereign wealth fund: Will it reshape US economy or just buy TikTok?

United States President Donald Trump has taken a significant step toward creating a US sovereign wealth fund, signing an executive order on Monday that directs officials to develop a plan for its establishment.

This fund, which Trump believes will soon become “one of the biggest,” could be used to acquire assets, including the embattled Chinese-owned social media platform TikTok.

During the signing ceremony, Trump stated, “I think in a short period of time, we’d have one of the biggest funds,” suggesting that the US could eventually rival nations such as Saudi Arabia, which has a sovereign wealth fund worth approximately $925 billion.

The directive instructs US Treasury Secretary Scott Bessent and Commerce Secretary-designate Howard Lutnick to present a detailed plan for the fund within the next three months.

What are sovereign wealth funds?

A sovereign wealth fund (SWF) is an investment entity owned and managed by a government, often funded by profits from natural resources, budget surpluses, or government-owned assets.

These funds exist in over 90 countries, with Norway’s Government Pension Fund Global leading the list, boasting assets exceeding $1.7 trillion.

Other major funds include those of China, Saudi Arabia, Singapore, and Kuwait, which use their funds for investments ranging from corporate stocks to infrastructure development.

Such funds have played a key role in global financial markets, with Qatar’s sovereign wealth fund
purchasing the UK’s famous department store Harrods in 2010, and Norway using its position as a Tesla shareholder to vote against Elon Musk’s controversial $50 billion pay package.

However, not all sovereign wealth funds have succeeded —
Malaysia’s 1Malaysia Development Berhad (1MDB) became a scandal-ridden debacle, leading to the downfall of Prime Minister Najib Razak and criminal charges related to billions of dollars in misappropriated funds.

How would the US fund be financed?

Unlike many countries with sovereign wealth funds, the United States operates with a budget deficit rather than a budget surplus. This raises the question: How will Trump’s proposed fund be financed?

US Treasury Secretary Scott Bessent stated that the plan involves “monetising the assets side of the US balance sheet for the American people.” The White House estimates that the federal government owns assets worth $5.7 trillion, some of which could be leveraged for investment purposes.

Trump has also floated the idea of financing the fund through tariffs and “other intelligent things,” though he has not provided specifics.

At the state level, 23 US states operate smaller-scale sovereign funds, collectively managing over $300 billion in assets. The largest among them, Alaska’s Permanent Fund, holds approximately $80 billion, funded through a portion of the state’s oil revenue and distributing dividends to residents annually.

Could the fund buy TikTok?

One of the most attention-grabbing aspects of Trump’s plan is the suggestion that the sovereign wealth fund could be used to acquire TikTok. The app, owned by China’s ByteDance, has been under scrutiny in the US over national security concerns, leading to threats of a ban unless it is sold to an American company.

Trump previously suggested that the US government could take a “50% ownership position” in TikTok through a joint venture.

However, legal experts warn that such an acquisition could face significant regulatory hurdles, including First Amendment concerns about government ownership of a social media platform.

What will the fund invest in?

Beyond TikTok, Trump has suggested that the US sovereign wealth fund would be used for “great national endeavours.” These could include infrastructure projects such as airports, highways, and manufacturing expansion.

Additionally, Trump has mentioned potential investments in medical research, though no specifics have been provided.

Countries with sovereign wealth funds typically use them to bolster their economies, generate returns, and maintain financial stability.

If properly structured, the US fund could serve as a long-term economic tool to manage government assets more efficiently.

What challenges lie in the future?

While Trump has set an ambitious goal of establishing the sovereign wealth fund within the next year, there are several challenges to overcome.

For one, there is no precedent for a US federal sovereign wealth fund of this scale, and concerns have been raised about the government’s ability to manage such a large investment entity.

Additionally, scepticism remains regarding public reception. Some critics argue that the US government should focus on reducing its budget deficit before creating an investment fund. Others question whether Americans would support a government-owned entity acquiring private businesses like TikTok.

Despite these concerns, Trump remains optimistic. “We have tremendous potential,” he said. “We’re going to create a lot of wealth for the fund.”

With inputs from agencies