$600bn Saudi-US trade pledge ‘unlikely to be achieved’

Alamy via Reuters

• $600bn of Saudi-US trade promised
• Would be 14% of GDP
• Oil income likely to fall

Saudi Arabia’s pledge to increase trade and investment with the US to at least $600 billion over President Trump’s four-year term is “very optimistic” and “unlikely to be achieved,” according to a Washington-based think tank.

Instead the kingdom is prioritising domestic projects and faces lower oil revenue.

The commitment was made by Crown Prince Mohammed bin Salman after President Trump suggested a financial deal could influence his decision to visit Riyadh.

It would require an average of $150 billion in annual trade and investment.

That would be equivalent to 14 percent of Saudi GDP, 40 percent of its export revenue, and more than half of its total imports, according to Tim Callen, a visiting fellow at the Arab Gulf States Institute in Washington and a former IMF official.

“Both Trump and the crown prince like big numbers,” Callen tells AGBI. “They grab attention and define a narrative.” 

During his first term as president, Donald Trump made Riyadh his first overseas visit in 2017, saying that Saudi Arabia agreed to buy $450 billion in US goods over the next four years.

That number, however, is roughly what the US has exported in goods and services to Saudi Arabia over the past 25 years combined, according to Callen, citing data from the Bureau of Economic Analysis.

During Trump’s first term, in the four years to 2020, the US exported less to Saudi Arabia than during the preceding term under Democrat President Barack Obama, at $92 billion, down from $110 billion.

That said, Saudi demand for US products and services, such as defence, technology, construction, tourism, health and finance, is expected to grow, Callen says. But even at a 10 percent annual increase, total shipments over the four years would reach only about $125 billion – “far short of the target”, according to Callen.

On the investment side, Saudi Arabia’s main sovereign wealth fund, the Public Investment Fund, has shifted its investment focus to the domestic.

Last year, it reduced international investments by 37 percent to $19.9 billion, from $31.6 billion the previous year, a report by Singapore-based consultancy Global SWF says. 

David Clifton, regional director at the engineering company AtkinsRéalis, says: “This follows a pattern of providing anchor and early-stage support to economic diversification, particularly infrastructure and catalyst developments inside the mega- and giga-projects.”

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Adding to the challenge is Saudi Arabia’s reliance on oil revenues, which are expected to fall in 2025, with reduced export volumes and lower international prices.

A more realistic number than $600 billion for Saudi purchases of US goods and services, and of investment in US assets over Trump’s current term, is likely to range between $100 billion and $200 billion, Clifton says.

“It may well increase, but the interlink between oil revenue and the ability to generate surplus capital will be key,” he says, which, if the statements by the oil producers’ group Opec+ come to fruition, “will not be achievable.”