The United States has reached trade agreements with Japan and South Korea. The U.S. will lower tariffs from a threatened 25% down to 15%, and Japan and South Korea will both invest hundreds of billions of dollars in U.S. projects, selected by the U.S. government.

South Korea will invest $350 billion and Japan will invest $550 billion. The Japanese agreement is the more fleshed out of the two. 

The U.S. has already listed the kinds of places it wants that money to go: “Strategic vital sectors,” said William Chou, a senior fellow at the Hudson Institute. “Things like semiconductors, critical minerals, shipbuilding, pharmaceuticals, AI infrastructure, energy.”

He said Japanese firms would be doing the investing, using loans from Japanese government affiliated banks. Japan maintains its side can refuse any project. 

The actual deciding will be done by the White House.

“There’s an investment committee that consists of representatives from the U.S. government,” said Kristi Govella, a senior advisor at the Center for Strategic and International Studies.

It would be led by Secretary of Commerce Howard Lutnick. A group of Japanese advisors would offer their thoughts.

“And so between these committees, they will assess potential projects and come up with good candidates that will then be recommended to President Trump, and President Trump will have the ability to select them,” Govella said.

This is not normally how private investment decisions are made.

“This is totally unprecedented,” said Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics. “It’s a venture into state capitalism. You could say it’s Chinese capitalism with American characteristics.”

He said history shows that democracies that get involved in industry don’t always decide productively.

“In a democratic country, the government is inclined to protect losers,” Hufbauer said. That is, companies that maybe should not survive.

The Biden administration did offer billions to largely competitive chip manufacturers, and various government agencies do routinely invest in startups. But rerouting private investment by Japanese multinationals that normally base their decisions on competitiveness is different, said Matt Slaughter, dean of Dartmouth’s Tuck School of Business.

“If you start to constrain the business choices of these companies, for whatever political or policy reasons, you run the risk of actually dampening the productivity and innovation that these companies bring to America,” he said.

Whether this works or not, we won’t know for many years.