Trump faces $2 trillion hurdle to win money from Saudi Prince
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
Tired of too many ads?
Remove Ads
US President Donald Trump 's hopes of securing as much as $1 trillion in investment commitments from Saudi Arabia might clash with another costly ambition - transforming the kingdom's own economy.Saudi Crown Prince Mohammed bin Salman's plans to diversify the oil-dependent country are likely to cost close to $2 trillion, according to estimates compiled by Bloomberg News . The sheer scale of domestic commitments — calculated by Bloomberg based on interviews with people familiar with the plans, US government projections, Saudi estimates and data from the researcher MEED — are transforming the kingdom's role in the global economy.Decades of earning more money than it spent at home once left Saudi Arabia with huge surpluses to invest abroad. High domestic spending and falling oil prices have now sent that into reverse. The petrodollar spigot is still churning out vast amounts of cash, but transforming the Saudi economy is a costly endeavor.Giant investment plans — most notably a futuristic new city called Neom that could cost over $1.5 trillion if completed, according to US State Department estimates and people familiar with the construction — have pushed the country into a widening deficit. Neom had been projected to cost $500 billion when it was unveiled in 2017.The Gulf nation has also committed to hosting several global events requiring large scale investments, including the World Expo 2030, the FIFA World Cup in 2034 and the AFC Asian Cup in 2027. Meanwhile, its Trojena project — part of Neom — is expected to add 30 kilometers of ski slopes for the 2029 Asian Winter Olympics.The costs for the preparation and hosting of these events could run into hundreds of billions of dollars, although specific numbers aren't available because the government doesn't provide details, two economists surveyed by Bloomberg News said.All these outlays will limit how much MBS can afford to hand to Trump , who arrives in Riyadh on May 13. Already, the kingdom has scaled back ambitions on parts of Neom. The kingdom's $940 billion Public Investment Fund is also cutting budgets on many projects and ramping up borrowing to keep up with spending commitments. While debt levels are currently low, they are at risk of steadily increasing.'Trump is chasing $1 trillion of investments, but Saudi Arabia can't deliver it,' said Ziad Daoud, chief emerging markets economist at Bloomberg Economics, pointing to the kingdom's current account balance turning negative over the past year. 'Saudi Arabia has become an importer of capital even with oil prices at relatively high levels, and it's likely to remain until at least 2030. That's going to reshape its relationship with the global economy.'Even if Saudi Arabia throws out big headline investment numbers during the visit and unveils a string of business partnership, much of the money may not trickle into the US economy any time soon. '$1 trillion of new trade and investment over the next four years is not going to happen,' said Tim Callen, a visiting scholar at the Arab Gulf States Institute in Washington. 'It would represent a huge increase on recent levels and would basically represent all the assets of the PIF and close to a full year of GDP.'MBS — as the kingdom's defacto ruler is called — has already helped Trump secure lower gasoline prices at home by boosting crude production. That's in contrast to when President Joe Biden visited, leaving Saudi Arabia empty-handed after meeting the crown prince to plead for help tackling soaring inflation.But that alone won't be enough to win favor with a president known for a transactional approach to foreign policy.The business community of Saudi Arabia has been fielding calls from government ministries scrambling for information on what trade and investments firms are planning to do with the US over the next few years, according to people familiar with the matter. Large contracts related to the development of MBS's economic transformation plan look likely to be handed to US firms.How much of all of this was going to happen anyway will be moot. It will help hand Trump attention-grabbing numbers, just as he's trying to convince Americans that his worldwide tariffs are good for the US economy and will boost their job prospects. Regardless of who is in the White House , Saudi Arabia needs to buy US goods and services to protect its borders and meet its ambitions to become a hub for things like artificial intelligence, global logistics, tourism, and finance.Still, getting that number up to $1 trillion could be tough. The Saudi government could try to stretch out any pledge to a decade or more, said Rachel Ziemba, adjunct senior fellow at the Center for a New American Security.'Overall, I think there will be more announcements and desire to work together - economically, in energy and AI and in terms of investment - rather than real concrete steps,' she said. 'Both Saudi Arabia and the US are probably comfortable being a bit vague on the details and finding a combination of purchase agreements, proposed investment and some areas of reduced trade barriers.'Saudi government representatives didn't respond to request for comment for this story.So far, MBS has promised Trump $600 billion in extra investment and trade with the US over the next four years. Yet, crude prices at around $63 a barrel put fresh pressure on the kingdom. Bloomberg Economics estimates that Saudi Arabia needs a price of $96 a barrel to balance its budget, and $113 if domestic spending by the PIF on MBS's projects is included.'Any external demands will only add pressure to an already stretched position,' Monica Malik, chief economist at Abu Dhabi Commercial Bank PJSC, said.To be sure, the Saudi government and the PIF have already started delaying some domestic investment plans and could delay them further or scale back some of its most ambitious plans. That would give them more room to spend in the short term.But the country's stretched finances have started to show up in the rising pace of Saudi debt issuance. The government borrowed the most on record in the first quarter, even more than in the depths of 2020 when oil prices turned briefly negative.Still, Saudi Arabia's total debt stands at $354 billion, only around 30% of gross domestic product and low by the standards of most other governments. It has over $400 billion of foreign reserves parked with the central bank and a large portion of that is US treasuries.'The current account will be in deficit in the coming years, meaning there will be no new money to invest overseas,' Callen said. 'So they will either have to borrow or sell existing investments to finance new investments in the US or elsewhere.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Mint
25 minutes ago
- Mint
Bank of Maharashtra to Crompton Greaves - Vinay Rajani of HDFC Sec suggests these 3 stocks to buy in the near-term
Stock market today: The Indian stock markets began the new week on a downbeat trend, influenced by global worries in spite of solid domestic GDP data. The benchmark indices fell as investor sentiment was affected by the renewed tariff threats from US President Donald Trump. At 12:34 IST, the Nifty 50 index was trading at 24,715 . 95, showing a drop of 35.70 points or 0.15%. Sensex was trading lower at 81,325.42, decreasing by 125.59 points or 0.15%. This pressure emerged following Trump's announcement to modify tariffs on steel and aluminum, which has rekindled fears of a trade conflict and economic pressures. Market analysts pointed out that although India's macroeconomic fundamentals are robust, as demonstrated by the strong GDP figures, the external challenges posed by the US tariff adjustments have overshadowed domestic gains. The potential for a broader impact on global trade and capital movements has led investors to exercise caution. Vinay Rajani of HDFC Securities recommends Bank of Maharashtra, Crompton Greaves Consumer Electricals Ltd, and City Union Bank Ltd. Check out his overall market views. Nifty 50 continued its consolidation for the second consecutive week with a weekly fall of 0.41%. Bank Nifty managed to outperform Nifty 50 with a gain of 0.33% and closed at an all-time high. Sectoral indices like PSU Bank, Capital market and Defense outperformed the benchmark with the weekly gain of 4.08%, 3.35% and 2.73% respectively. Indices like FMCG, tourism, and commodities underperformed by falling 2.16%, 1.90% and 1.61% respectively. The Nifty Microcap250 index rose 1.47% and managed to outperform Nifty 50 with a good margin. Nifty 50 has been protecting its level above 20 days EMA and SMA, placed 20,630 and 20,692 respectively. A level above all key moving averages indicates a bullish trend on all time frames for Nifty 50. Any level above 25,116 would confirm the bullish breakout from the consolidation. The lower band of the consolidation is placed near 24,400 levels, below which short term would turn bearish. Above 25,116, Nifty 50 could move towards immediate resistance of 25,300 odd levels, which happens to be 78.6% retracement of the entire fall seen from all time high of 26277 to recent swing low of 21743. Above 25300, We expect Nifty 50 to hit a new all-time high above 26277 and go beyond. Midcap and Microcap indices have been showing strength, which shows the strong breadth in the market. The Bank Nifty index has closed at fresh all-time highs with recent outperformance. Both PSU and Private bank stocks are looking strong on the chart and likely to take a lead in the coming sessions. Nifty Capital Market index has given a fresh breakout above its previous all-time highs. Considering the momentum and the chart setup, this index is likely to extend its gain in the coming days. Ratio Chart of Copper v/s Gold indicates that Copper should start outperforming gold from here for the medium to long term. Historically, Copper used to have a positive correlation with equity markets. Primary trend is bullish but short-term consolidation is going on in the Nifty 50. Traders should continue to hold on to the long positions with 24,462 stoploss in the Nifty 50. Any level above 25,116 will confirm the fresh bullish breakout. Above 25,116, we can expect Nifty 50 to extend the rise towards 25,300. Above 25,300 Nifty 50 could register fresh all-time highs. Vinay Rajani of HDFC Securities recommends these three stocks in the near term - Bank of Maharashtra, Crompton Greaves Consumer Electricals Ltd, and City Union Bank Ltd. Bank of Maharashtra share price surged 6% on 30 th May with big jump in volumes. Stock has been in to a primary uptrend as it has been sustaining above its key moving averages. PSU Bank index has broken out from the consolidation on the medium-term chart. Weekly MACD is now placed above signal and equilibrium line. Breakout from Symmetrical triangle pattern on the weekly chart. City Union Bank share price has been sustaining above 200 DEMA resistance. Stock price is now placed above 20, 50 and 200 days EMA. Monthly RSI has reached above 50, indicating sustainable up trend. Weekly MACD is now placed above signal and equilibrium line On week ended 16 th May 2025, Crompton Consumer share price broke out from downward sloping trend line on the weekly chart. Price rise was accompanied by a jump in volumes. Stock price has been sustaining above 50 DEMA resistance. Weekly RSI has reached above 50, indicating a sustainable up trend. Weekly MACD is now placed above signal line. Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
Time of India
27 minutes ago
- Time of India
India-US trade pact: Effort on to facilitate preferential market access for both sides, says Piyush Goyal
Live Events (You can now subscribe to our (You can now subscribe to our Economic Times WhatsApp channel India and the United States are keen on providing preferential market access to each other's businesses, with teams from both nations collaborating on a proposed bilateral trade agreement, Commerce Minister Piyush Goyal said on June 2. In February, Donald Trump and Narendra Modi underlined the two sides' intentions to negotiate the initial phase of a mutually advantageous multi-sector Bilateral Trade Agreement (BTA) by the fall of 2025, specifically targeting agreement aims to increase bilateral trade from the current figure of $191 billion to $500 billion by the year told reporters in Paris, during an official visit, that both nations are dedicated to collaborating and that there is a mutual desire to provide preferential access to each other's response to a question regarding Trump's announcement to raise tariffs on steel and aluminum to 50 per cent, Goyal stated that both countries will continue to work on resolving such issues through bilateral discussions."Let's wait and see; both the US and India share a positive relationship and will persist in resolving these matters through dialogue," Goyal specialists have indicated that the Trump administration's potential increase in import duties could adversely affect Indian exporters, particularly those involved in value-added steel products and auto May 30, Trump declared his plan to raise the existing 25 per cent tariffs on steel and aluminum imports, effective June 4. The initial tariffs were invoked in 2018, with a 25 per cent tariff on steel and 10 per cent on aluminum, which was later raised to 25 per cent on aluminum in February the fiscal year 2024-25, India exported iron, steel, and aluminum products worth $4.56 billion to the US, with key exports including $587.5 million in iron and steel, $3.1 billion in iron or steel articles, and $860 million in aluminum and related has also lodged a formal complaint with the World Trade Organization (WTO), asserting its right to impose retaliatory tariffs on American goods in reaction to the previous steel tariffs. This week, a delegation of US officials is visiting India to discuss the proposed interim trade agreement between the two significance of this visit is heightened by the expectation that India and the US may reach an interim trade agreement by the end of June, with India advocating for a complete exemption from the 26 per cent reciprocal tariff on domestic Agrawal, India's chief negotiator and Special Secretary in the Department of Commerce, concluded a four-day visit to Washington last month, where he engaged in discussions with his US counterpart regarding the proposed agreement. Goyal was also in Washington to further advance trade negotiations. There is a possibility that both nations might finalize an interim trade deal prior to the first phase the fourth consecutive year in 2024-25, the US maintained its status as India's largest trading partner, with bilateral trade reaching $131.84 billion. The US contributes approximately 18 per cent to India's total goods exports, 6.22 per cent to imports, and 10.73 per cent to the overall merchandise trade of the India's free trade agreement with the four-nation European bloc EFTA, Goyal clarified that the $100 billion foreign direct investment (FDI) commitment under this agreement does not account for funds entering the stock market through foreign institutional investors (FIIs)."This represents solid FDI coming into the nation... This $100 billion in FDI is accompanied by technologies... It will likely catalyze approximately $500 billion in investments," he stated. He emphasized that such investments would foster the development of a comprehensive ecosystem, leading to the establishment of hotels, infrastructure, and the utilization of power and water resources, thus significantly contributing to the economy. The implementation of this pact is advancing rapidly, with expectations for it to be operational by the year's Trade and Economic Partnership Agreement (TEPA) was signed by the two sides on March 10, 2024. Under this agreement, India has secured an investment pledge of $100 billion over 15 years from the grouping, while allowing several products, including Swiss watches, chocolates, and cut and polished diamonds, to be imported at lower or zero members of the European Free Trade Association (EFTA) include Iceland, Liechtenstein, Norway, and Switzerland. When queried about the possibility of a similar arrangement in the proposed trade pact with the 27-nation EU bloc, Goyal remarked, "The member countries are significant investors in India, so we may not pursue that avenue in our FTA with the EU."
Hindustan Times
28 minutes ago
- Hindustan Times
Bill Clinton's dig at Donald Trump over ‘my way or highway' style governance: 'Never seen…'
Former US president Bill Clinton has slammed Donald Trump's ignorance of the American legal system, saying he had never seen a leader who says, 'Whatever I want should be the law of the land". He added that most Americans 'don't agree with that". Bill Clinton was in an interview with CBS Sunday Morning, when he said Trump is acting in ways that go against American values and 'We've never seen anything like this before in my lifetime – somebody that says, 'Whatever I want should be the law of the land. It's my way or the highway.' he added. The ex-President then discussed Donald Trump's behaviour, which includes 'calling people names' and using forceful tactics. He said, 'I like to think that he's paid a price for this, you know, name-calling and throwing his weight around. I think it's made him less popular,' Clinton said. Clinton believes that while Trump can lead however he wants, the courts and elections will decide if his actions are acceptable. 'Only elections are going to change this,' he said. 'He (Trump) is looking for ways to basically defy all these court orders. But I think he'll have a hard time doing that. And if he does, I think it will hurt him in America,' Bill Clinton said. The former President added that the courts, including judges appointed by Trump himself, are pushing back. 'I do think the courts are getting their dander up,' he added. He then went on to criticise the republican President's attempts to block law firms from representing clients in federal buildings because of political disagreements. 'That ain't America. We've never done that,' Clinton said. 'The whole purpose of having a legal system is to have both sides be heard.' Clinton also urged Americans to work together and avoid division. 'Someone needs to stand up and say, 'Damn it, what we have in common matters more. We cannot destroy other people's trust in us. We need to preserve that and find a way to work together,' he said. 'We gotta just calm down and try to pull people together again,' CBS quoted former US President as saying. When asked about a recent book that questions Joe Biden's mental abilities, Clinton dismissed the claims. He said he had never seen Biden struggle. 'I thought he was a good president… I had never seen him and walked away thinking, He can't do this anymore. He was always on top of his briefs.' Clinton said he hadn't read the book, explaining, 'I didn't want to. 'Cause he's not president anymore, and I think he did a good job.' He also warned that some people might be using the book to blame Biden for Trump's return.
