Trump Orders The Establishment Of US State Wealth Funds, Can Buy TikTok

The President of the United States, Donald Trump, signed an executive order (photo: x @potus)

JAKARTA The President of the United States, Donald Trump, signed an executive order on Monday 3 February to form state wealth funds within the next one year. Trump stated that the fund has the potential to purchase the short video application TikTok which is currently facing regulatory pressure in the US.

If realized, the state's wealth fund will put the US on par with many other countries, especially in the Middle East and Asia, which already have a similar mechanism for making direct investments with government funds.

However, the executive order has not detailed the source of funding or the working mechanism of this fund. Trump only instructed the Treasury Department and the Commerce Department to draw up plans within 90 days, including investment strategies, fund structures, governance models, and financing schemes.

State wealth funds generally come from budget surpluses, but the US itself is experiencing a deficit. Therefore, the formation of these funds most likely requires Congressional approval. Trump previously suggested that these funds could be financed from import rates and "other smart things."

US Treasury Secretary Scott Bessent confirmed that this fund will be realized in the next 12 months. "We will monetize US assets for the benefit of the American people," Bessent said.

One option under consideration is to change the function of the US International Development Finance Corp (DFC) into state wealth funds. Bloomberg reports that the Trump administration has reviewed the possibility in recent months. Currently, the DFC serves as a government agency partnering with the private sector in project financing in developing countries.

Trump has also appointed Benjamin Black as DFC's new head. Black is a management partner at investment firm Fortinbras Enterprises and son of Leon Black, co-founder of Apollo Global Management.

In another surprise, Trump hinted that the state wealth funds to be formed could be used to buy TikTok. The Chinese app faces a ban on US since a law requiring ByteDance to sell its assets took effect on January 19.

Trump, who officially returned to office on January 20, signed an executive order delaying the 75-day implementation of the law. He said he was talking to several parties about the potential acquisition of TikTok and would make a decision in February.

"We're probably going to do something with TikTok, or maybe not," Trump said. "If we get the right deal, we'll do it. If not, then no. We could put TikTok into state wealth funds."

The discourse on establishing wealth funds for the US state has received skeptical responses from various parties. Some economists consider this step to be contrary to the current US economic conditions.

"Usually, state wealth funds are formed when a country has an investable surplus. Economic rules are not appropriate," said Colin Graham, Head of Multi-Aset Strategy at Robeco London.

In addition, Clemence Landers, a former Ministry of Finance official who now works at the Center for Global Development, confirmed that Congress should approve funding for this kind of new institution. "You can't form an institution just with executive orders, let alone fund it," he said.

Currently, there are more than 90 state wealth funds worldwide that manage more than $8 trillion in assets, according to International Forum of Sovereign Wealth Funds data. Some US states such as Alaska, Texas, and New Mexico also have similar funds used for various purposes, such as education and tax cuts.

However, will the US really have state wealth funds capable of buying TikTok? With so many questions about funding and regulation, the implementation of this policy seems far from certain.