As President Donald Trump takes aim at government debt, he’s embraced a bold — and, according to some financial experts, confusing — plan to secure the country’s financial future.

Trump announced Monday that his administration will establish a sovereign wealth fund and use it to “promote fiscal sustainability” and reduce the tax burden shouldered by American families.

“I think in a short period of time, we’d have one of the biggest funds. And you know, some of some of them are pretty large,” Trump told reporters after signing the sovereign wealth fund executive order, according to The New York Times. “So, that’s a big deal, huh?”

What is a sovereign wealth fund?

A sovereign wealth fund is an investment fund operated by government officials instead of an individual or business.

Governments use sovereign wealth funds to diversify their economy and finance development projects, per The Washington Post.

President Donald Trump signs an executive order in the Oval Office of the White House, Monday, Feb. 3, 2025, in Washington. | Evan Vucci

Dozens of countries, including Norway, China and Saudi Arabia, have sovereign wealth funds, but they’re often associated with oil-rich countries, which use them to ensure that they’ll still have money coming in if the oil market runs into trouble.

“Sovereign wealth funds exist around the world as mechanisms to amplify the financial return to a nation’s assets and leverage those returns for strategic benefit and goals,” the White House fact sheet on sovereign wealth funds explains.

U.S. sovereign wealth fund

There are already several active sovereign wealth funds in the U.S.

They’re part of life in 23 states, including Alaska, which uses one to pay an annual dividend to residents, according to The Washington Post.

But Trump’s proposal for the first-ever federal sovereign wealth fund still raised eyebrows, mostly because it’s not immediately clear if the U.S. can afford one.

“Successful funds are typically created by countries when they have little to no debt. The United States does not fall into that category — its debt is about $36 trillion," The Washington Post reported.

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The new executive order does not lay out a plan for creating a fund. Instead, it instructs the secretary of the treasury and the secretary of commerce to submit a plan within 90 days.

Howard Lutnick, who has not yet been confirmed as commerce secretary, has said that the U.S. could build up a sovereign wealth fund by taking a stake in the companies it’s making large purchases from, The New York Times reported.

“If we are going to buy two billion Covid vaccines, maybe we should have some warrants and some equity in these companies and have that grow for the help of the American people,” he said.

Trump on buying TikTok

Although the U.S. government’s TikTok ban will take effect again before the Trump administration finalizes its plan for a sovereign wealth fund, the president suggested Monday that the fund could be used to make a deal with the popular social media app.

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“I have the right to do that, and we might put that in the sovereign wealth fund, whatever we make, or if we do a partnership with very wealthy people, a lot of options, but we could put that as an example in the fund,” Trump said of buying TikTok, per The New York Times.

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The TikTok ban dates back to April 2024, when Congress passed and former President Joe Biden signed a law aiming to force the sale of the app. It came in response to national security concerns about TikTok’s Chinese owners.

The ban took effect on Jan. 19, one day before Trump returned to office, but then he paused the ban for 75 days with an executive order signed on Jan. 20.

“The text of the order said this will give Trump’s administration time ‘to pursue a resolution that protects national security while saving a platform used by 170 million Americans,’” NPR reported last month.

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