In early August, President Donald Trump claimed that a trade deal he negotiated with the European Union in July came with hundreds of billions of dollars that the U.S. can use for “anything we want.” But that’s not how the terms were described in a joint statement with the EU on Aug. 21.
The “framework agreement” with the EU announced last week only said that “European companies are expected to invest an additional $600 billion across strategic sectors” in the U.S. during Trump’s term. It did not say money has been paid to the U.S., or that Trump will dictate whatever investments are made, as Trump claimed.
The administration has been negotiating various trade deals as the president has imposed, or threatened, new tariff rates on U.S. imports from countries around the world. Trump announced the broad outlines of a deal to lower Trump’s proposed tariffs on goods from the 27 EU nations in late July, days before new tariffs were going to take effect on Aug. 1.
In an Aug. 5 interview on CNBC, Trump said he agreed to lower the tariffs because the EU agreed to do the same for certain imports of U.S. goods and gave the U.S. more than half a trillion dollars to invest with no restrictions.
“They brought down their tariffs” and “they paid $600 billion,” Trump said. “And because of that, I reduced their tariffs from 30% down to 15%.”
Trump described the $600 billion as a “gift” to the U.S. that does not need to be repaid.
“That’s not a loan that, oh, gee, three years comes up, we have to pay it back,” he said. “There’s nothing to pay back. They gave us $600 billion that we can invest in anything we want.”
But to be clear, this is not a payment gifted to the U.S. Several EU statements described this as an “expected” or “estimated” investment from various companies in the EU over several years.
A joint U.S.-EU statement about the “framework agreement” that was released Aug. 21 says, “The United States and the European Union share one of the world’s largest economic relationships, supported by mutual investment stocks exceeding $5 trillion, and intend to promote and facilitate mutual investments on both sides of the Atlantic. In this context, European companies are expected to invest an additional $600 billion across strategic sectors in the United States through 2028. This investment reflects the European Union’s strong commitment to the transatlantic partnership and its recognition of the United States as the most secure and innovative destination for foreign investment.”
Prior to the joint statement, other EU documents summarizing the tentative deal said “EU companies have expressed interest in investing at least $600 billion (ca. €550 billion) in various sectors in the US by 2029, further boosting the already significant €2.4 trillion in existing investment.”
That’s similar to what European Commission spokesperson Olof Gill told us. He said the commission reached out to “relevant EU industries and economic sectors” to gauge their upcoming “investments intentions” in the U.S. “On this basis, the EU Commission was able to present a coherent, non-binding commitment to the US on estimated EU investment in the coming years,” he said in an email.
Importantly, the New York Times reported last month that while the commission “can play a role in convening, organizing and encouraging big spending … it cannot compel such outlays.”
A final agreement with the EU hasn’t been signed yet, but Trump said in the CNBC interview that if the investments don’t happen he would raise tariffs on EU goods to 35%.
The White House did not answer our questions about Trump’s claim about the EU deal.
Japan
Trump’s description of a trade deal with Japan also is a bit different from how a Japanese trade official has described it.
“If you look at Japan, we’re taking in $550 billion and that’s like a signing bonus that a baseball player would get,” Trump said on CNBC. “I got [a] signing bonus from Japan of $550 billion. That’s our money. It’s our money to invest, as we like.”
Trump previously called it “seed money” put up by Japan in exchange for him imposing a lower tariff rate on U.S. imports of Japanese goods.
Christina Davis, a professor of Japanese politics and director of the program on U.S.-Japan relations at Harvard University, told us that probably isn’t the exact deal.
“I would find that very difficult to see in a trade agreement,” she said in a phone interview. “What is possible is that the Japanese government has made commitments to support up to $550 billion largely through lending and that would be consistent where there’s Japanese financial support for expanding investment in critical sectors of importance that are shared interests for Japan and the United States.”
A fact sheet the White House issued in late July about the trade negotiations said “Japan has agreed to invest $550 billion in the United States to rebuild and expand core American industries, as well as to further open its own market to U.S. exports, all while paying a baseline 15% tariff rate.” Another White House document said that the money would be “directed by the United States.”
But Japan’s chief trade negotiator, Ryosei Akazawa, has said only a small fraction of the $550 billion fund would be direct investment from Japan.
“It’s not that $550 billion in cash will be sent to the U.S.,” Bloomberg News quoted Akazawa saying in an interview on a Japanese public broadcast station. “The $550 billion investment framework combines investments, loans and loan guarantees provided by financial institutions backed by the Japanese government, Akazawa said,” Bloomberg reported. “Of the total, investment will comprise 1% or 2% and the U.S. and Japan will split the profits of that investment at a ratio of 90-10 [respectively], he said.”
The Wall Street Journal reported on July 28 that in another interview Akazawa said Japan’s commitment could be stretched out over the remainder of Trump’s second term, and that the Japanese bank that would be responsible for approving the loans would review all of the investment projects to make sure they comply with Japanese law. The Journal said critics of the deal in Japan had expressed concern that “Tokyo would have to follow Trump’s orders on what to fund, potentially threatening the finances of the Japan Bank for International Cooperation, or JBIC.”
Akazawa, according to the Japan Times, later told reporters, “We can’t cooperate on things that don’t benefit Japanese companies or the Japanese economy,” while acknowledging that Trump’s “intentions will no doubt have a strong influence” on which projects receive funding.
Davis said Japan and the U.S. “both agree that developing advanced semiconductors, quantum computing, pharmaceuticals, are all important,” and those are areas “where you could see Japanese government-backed financial institutions” issue loans “to underwrite expanding investments in those sectors.”
Bloomberg reported that Akazawa said Japan would collect interest on the loan payments, and fees on the loan guarantees “if nothing happens” with them. An agreement still has not been finalized.
When we asked about Trump’s description of the Japan deal, a White House official told us in a statement: “Japan committed to putting up $550 billion in an investment vehicle that would be invested at the President’s direction. We intend our trading partners to live up to their commitments, and the President reserves the right to adjust tariff rates if any parties renege.”
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