NICHOLAS SHUBITZ: Trump, MBS and the trillion-dollar handshake

In international diplomacy, political theatre sometimes disguises a lack of tangible outcomes. This may be the case with President Donald Trump’s recent visit to Saudi Arabia, where staggering promises of a $1-trillion of Saudi investments into the US were made, a figure mirroring the entirety of the kingdom’s GDP and sovereign wealth fund.

During the visit Crown Prince Mohammed bin Salman (MBS) '‘committed” $600bn to the US, with the $1-trillion figure floated as a long-term goal. These are huge numbers, which give the appearance of strong economic ties between the two nations. However, experts view these figures with scepticism, citing Saudi Arabia’s budget deficits, low oil prices and existing Saudi spending commitments as significant constraints to the realisation of these ambitions.  

Saudi Arabia’s finances are already spread thin. The kingdom’s budget deficit is projected to hit $30bn this year, continuing a trend of fiscal shortfalls that is expected to stretch well into the future. This financial pressure is compounded by commitments to existing expensive domestic mega projects under the banner of the kingdom’s Vision 2030 initiative.  

Vision 2030 represents a transformative agenda for Saudi Arabia, aiming to modernise both the economy and society. This is a good strategy for a country that remains highly dependent on oil revenues in an era when new transport technologies could have a material effect on oil demand. That said, the price tag associated with this agenda is enormous and some have suggested these projects represent a mirage in the desert rather than a truly profitable oasis.   

While Vision 2030 remains important to Saudi Arabia’s economic diversification efforts, many of the projects are facing budget overruns and delays, raising concerns about their feasibility and return on investment. For example, the Neom project, which includes an indoor city built inside a 170km horizontal skyscraper, is already forecast to blow past its $500bn budget, with cost estimates from a leaked McKinsey & Co internal audit reaching an eye-watering $9-trillion.

Saudi Arabia’s almost $1-trillion Public Investment Fund (PIF) is expected to play a pivotal role in financing these projects. However, while the PIF has already committed substantial funds to projects like Neom, these investments are contingent on oil prices remaining above $100 a barrel, combined with continuous investment returns for the fund’s existing portfolio of assets. As such, it remains unclear whether Saudi Arabia can fulfil all its spending commitments.

Similarly, while announcing enormous investment deals with the Saudis may give Trump the appearance of a great statesman doing deals to enrich his citizens and bring stability to the Middle East, the reality is far more complex. Much of these investments will go to US defence firms at a time when neither state has managed to bring lasting peace to the region.  

That said, the US president gave a landmark speech during his visit in which he criticised Western interventionism and “so-called nation builders” who “wrecked far more nations than they built” by “intervening in countries they did not understand”. As such, while the numbers may be inflated and conflicts rage on, Trump’s strategic shift remains an important development.  

While the US and Saudi Arabia work to build a Middle East known for business instead of war, it is difficult to ignore the fact that the nations’ strongest ties remain in defence and security co-operation. At the same time, the structural dynamics of the relationship between the two countries have evolved in ways that challenge the economic foundation of the relationship.  

The most obvious example of this is the fact that the US has become a major competitor to Saudi oil interests, while China has replaced the US as the largest buyer of Saudi crude. This is a marked departure from the early 2000s, when Saudi Arabia was the primary oil supplier to the US. Imports peaked at 2.2-million barrels a day (bbl/day) in 2003. Twenty years later this figure had fallen to less than 500,000bbl/day in 2023 due to increased US production.  

Conversely, Saudi oil exports to China have surged. In the first quarter of 2025, Saudi Arabia exported 145-million barrels to China, averaging 1.6-million barrels a day, a 4% increase from the same period in 2024. This shift underscores China’s growing economic importance to the kingdom. Nevertheless, Saudi Arabia still reported a 2025 first-quarter budget deficit of $16bn, driven by a 20% drop in oil revenues, which was largely the result of the recessionary risks associated with Trump’s trade policies.

Optics aside, the reality is that China is Saudi Arabia’s most important economic partner and emerging markets its biggest source of future oil revenues due to demand dynamics. Economic diversification may create alternative revenue streams in future, but these investments will have to be paid for with oil revenues, which still account for more than half the Saudi budget.

The PIF does have about $1-trillion in assets. But this is not cash on hand. Three quarters of the fund is invested in the domestic economy, while foreign investments account for the other 25%, half of which are in public equity. Add up all Saudi Arabia’s US based investments, all past and future military expenditure, and throw in a few speculative promises, and you’ll still struggle to reach $600bn, let alone $1-trillion in new foreign direct investment (FDI).

According to the US commerce department, Saudi FDI in the US is actually less than $10bn. This is an important distinction because PIF purchases of Apple stock might lead to a factory being built in India rather than Indiana. These stocks would also have been purchased at lower prices but are now valued at a higher level due to growth in the stock market, illustrating some of the accounting magic behind the $600bn figure.     

One area where the spending commitments appear legitimate is on defence, with Saudi Arabia budgeting almost $80bn for defence in 2025. This represents a hefty 20% of government expenditure and 7% of GDP. A landmark $142bn arms deal was agreed at the Trump-MBS meeting, which promises the Saudis upgrades to a full range of advanced US weapons systems.  

However, beneath the glimmering surface the kingdom’s economic challenges persist, and the feasibility of the touted investment figures remains questionable. At the same time, regional instability has already illustrated the limits to Saudi and US power projection in the Middle East, despite their military co-operation, while Saudi oil revenues still depend heavily on China.

The Trump-MBS meeting ultimately serves as an example of how transactional US foreign policy has become and the performative rather than substantive nature of its relationships. Considering SA’s recent experience at the White House, world leaders may increasingly seek stage management over genuine co-operation — like a handshake for $1-trillion that doesn’t exist.  

• Shubitz is an independent Brics analyst.