Trump Plans to Create a U.S. Sovereign Wealth Fund and Suggests Potential TikTok Acquisition

President Donald Trump signed an Executive Order (EO) on Feb. 3, 2025, directing the Treasury and Commerce secretaries to submit a comprehensive plan within 90 days for the creation of the United States' first Sovereign Wealth Fund (SWF). The report should outline the fund's structure, governance model, funding mechanisms and investment strategies.

The SWF is intended to manage and invest government assets to generate revenue and advance national interests such as fiscal sustainability, lighter tax burden for families and small businesses, and economic security. Trump has also indicated that the fund could be used to purchase TikTok, the widely popular short-video platform owned by China's ByteDance.

What Is a Sovereign Wealth Fund?

An SWF is a state-owned investment entity that allocates national assets – including stocks, bonds, real estate and natural resources – into financial markets to generate returns. Typically funded by budget surpluses or revenues from natural resources such as oil and gas, SWFs serve multiple objectives, such as economic stabilization, income diversification, long-term savings and strategic investments in key industries. These funds are generally managed by a country's central bank or a specialized government agency.

Common purposes of SWFs include:

• Economic Stabilization. Mitigating economic volatility caused by fluctuations in commodity prices.
• Savings for Future Generations. Building financial reserves to sustain economic security in the long term.
• Economic Diversification. Reducing dependence on a single revenue source by investing across various sectors.
• Strategic Investments. Acquiring assets that align with national interests, such as infrastructure and technology.

What Could Happen with Trump's SWF?

President Trump's EO calls for the establishment of SWF, directing the U.S. Department of the Treasury and Department of Commerce, in close coordination with the Office of Management and Budget (OMB) and the assistant to the president for economic policy, to develop a comprehensive plan within 90 days. This plan should include recommendations on the fund's structure, investment strategies, governance model and potential funding mechanisms.

The goal is to create an SWF that maximizes U.S. national wealth, contributing to fiscal sustainability and strategic economic growth. According to the White House, the fund can leverage returns to promote fiscal sustainability of the country, lessen the burden of taxes on American families and small businesses, establish long-term economic security, and promote U.S. economic and strategic leadership internationally.

Although the precise funding sources remain unclear, the administration has suggested it could be funded through tariffs or other revenue-generating measures. The White House claims that the U.S. holds a vast sum of highly valued assets that can be invested through a SWF for greater long-term wealth generation. The federal government directly holds $5.7 trillion in assets, and when including natural resource reserves, the total asset is far larger.

SWFs are common worldwide, with nations such as Norway, the United Arab Emirates and China using them to diversify their economies and invest in global assets. Many pension funds in Canada and Europe are types of SWFs. For example, Norway's Government Pension Fund Global, valued at over $1.7 trillion, invests oil revenues to fund government expenses and save for future generations. The United Arab Emirates' Abu Dhabi Investment Authority uses oil revenues to diversify its economic base, while China's China Investment Corporation manages foreign exchange reserves to drive returns and support economic development. With more than 100 SWFs globally managing more than $8 trillion in assets, these funds play a crucial role in long-term wealth generation.

However, the U.S. faces a significant challenge in setting up an SWF, as the government currently operates at a deficit projected at $1.9 trillion for this fiscal year. Additionally, the federal government's largest asset appears to be student debt. Moving forward with key structural decisions may also require congressional approval. At the state level, Alaska, Texas and New Mexico already operate their own SWFs, funded by natural resource revenues, which help finance various state priorities such as education and tax relief. The House claimed 23 states maintain their own funds that control in total $332 billion in assets.

The Trump Administration's SWF plan could resemble these state-level funds but on a national scale. Nonetheless, the path forward will be challenging, and some fear that the money from the fund could be used to fund projects for political gains and could incentivize corruption. As always, the devil is in the details and the strength of one nation's democracy.

The Potential Acquisition of TikTok

One notable aspect of the administration's potential investment strategy for the SWF is its involvement in acquiring significant assets or equity in private companies, such as the purchase of TikTok, whose fate remains uncertain in the U.S. due to national security concerns involving its Chinese owner, ByteDance. President Trump suggested last month that the U.S. could participate in a joint venture to acquire TikTok, namely, a SWF, which could be among the cleanest ways of giving the U.S. a stake in the company without nationalizing it.

Negotiations for TikTok's potential sale have been slow, with ByteDance appearing to delay talks while awaiting approval from the Chinese government. Meanwhile, American business allies of President Trump are attempting to broker a deal to sell the app to a U.S. bidder. Beijing's response is expected to become more stringent, possibly choosing to let TikTok's U.S. operations decline rather than approve a sale, as part of a broader strategy to extract favorable trade and tech policy concessions from the Trump Administration.

This situation plays out amid escalating tensions between the U.S. and China. The U.S. has imposed tariffs on Chinese imports, and China has retaliated by restricting exports of critical minerals and launching an antitrust investigation into Google. (See Holland & Knight's previous alerts, "An Overview of IEEPA Duties on Canada, Mexico and China" and "China's Retaliatory Measures in Response to Trump Tariffs," Feb. 4, 2025). The potential purchase of TikTok could be a strategic maneuver in this broader geopolitical struggle, as China might use the app as a bargaining chip in trade talks with the U.S.

Conclusion and Considerations

The direction to create a SWF under President Trump's EO introduces a range of opportunities and risks, particularly presenting significant trade compliance and geopolitical challenges. Potential transactions through a SWF would require rigorous evaluation of its national security implications by the host country in a foreign investment transaction, including potential challenges under existing export control regulations and foreign investment screening regimes. A U.S. SWF would be a state-owned investor, and U.S. government investment abroad might not be as welcome as money from private U.S. investors.

As Holland & Knight monitors the ongoing discussions around the SWF and its strategic acquisitions, including TikTok, we are committed to providing thorough analysis on the regulatory, trade compliance and national security implications of this initiative. For further insights and guidance, please contact the authors or another member of Holland & Knight's International Trade Group.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.