Luring foreign direct investment (FDI) to US shores ranks high among President Donald Trump’s objectives. Through his efforts, firms have announced multiple new commitments. Nevertheless, Tej Parikh writing in the Financial Times concluded that Trump’s FDI trophies are a “mirage”: Many commitments either will not be implemented or will be implemented slowly.
Rather than evaluating corporate promises, we contrast Trump’s claims against the past record of FDI inflows and against FDI determinants revealed by econometric analysis. We conclude that Trump’s quest may boost US inflows above levels recorded in 2023 and 2024, and perhaps approach $400 billion in 2025, but will fall short of Trump’s aspirations.
Our examination is divided into three parts: inward FDI flows in 2015-24; Trump’s statements and policies; and factors determining FDI flows.
Inward FDI flows, 2015-24
Table 1 reports annual OECD data on inward FDI flows to the three largest destinations, the US, the EU, and China, over the past decade. In 2020, owing to COVID-19, inward FDI dropped sharply except for China. A few years later, geopolitical tensions slashed inward FDI flows to China.
| Table 1 Annual aggregate inward FDI flows, 2015-24 (billions of dollars) | ||||||||||
| Reporting economy | 2015 | 2016 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | 2024 |
| United States | 483.8 | 480 | 325.1 | 216.4 | 256.7 | 111.9 | 403.4 | 352.9 | 288.7 | 307.9 |
| European Union* | 1,008.70 | 448.1 | 500.1 | 422.2 | 427.7 | 72.2 | 382.1 | 3.8 | 154.4 | 294.1 |
| China | 242.5 | 174.7 | 166.1 | 235.4 | 187.2 | 253.1 | 344.1 | 190.2 | 51.3 | 18.6 |
| * Between 2015 and 2019, the EU data cover 28 countries, including the UK. Starting in 2020, the EU data cover 27 countries, excluding the UK. The sharp drop in EU inflows during 2022 was apparently driven by large withdrawals of capital by a telecommunications multinational enterprise operating in Luxembourg. | ||||||||||
| Source: OECD FDI flows main aggregates, BMD4. According to the OECD, its accounting method is “net” for both inward and outward FDI in BMD4 data. Thus, inward FDI is foreign investments in domestic affiliates, including loans from foreign subsidiaries, minus reverse investments from domestic affiliates to foreign parents or subsidiaries. | ||||||||||
Inward FDI recovered following the pandemic for the US and the EU, but US inflows in 2024, at about $300 billion, were only three-fifths the level recorded in 2015. The $12 trillion of new FDI commitments claimed by Trump (discussed below) would amount to a hefty $1.2 trillion annually if implemented over a decade. That level would far exceed annual inflows recorded in the past decade.
According to fDi Intelligence, capital expenditure pledges by foreign firms between January and April 2025, in response to Trump’s demands, amounted to around $200 billion. If that pledge pace continues for the rest of the year, and if all pledges are implemented in 2025—two highly improbable assumptions—the US would record $600 billion of inward FDI flows in 2025, an impressive figure but well short of Trump’s claim.
Trump's statements and policies
In October 2024, before the election, Trump told Bloomberg, "The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States, so it doesn't have to pay the tariff."[1]
In February 2025, a month after his inauguration, Trump issued a fact sheet welcoming FDI from “partner countries” and passive investment from all countries, while screening FDI from China and other adversaries.
In March 2025, an Investment Accelerator was established by the administration to “facilitate and accelerate investments above $1 billion in the United States” and “[to negotiate] much better CHIPS Act deals than the previous Administration.”
Then, on May 16, 2025, during his Middle East tour, Trump claimed that the US is headed toward $12 trillion in foreign investments since he took office. “There’s never been anything like it. We are at a level that no country has seen…. [E]very time I meet [foreign investors] I usually increase [the figure] by about a trillion dollars because we get news of another investment. But we are probably in the 12-13 trillion dollars [inward] investment [range]….”
Trump’s foremost policy to lure foreign direct investment is a high tariff wall, chaotically threatened and implemented since his inauguration. In theory Trump’s tariffs might induce market-seeking FDI. But the fact that tariffs hit essential intermediate goods sharply curtails (and may reverse) their attraction for FDI. Four other policies are also prominent.
First is Trump’s tactic of eliciting exaggerated investment commitments from major CEOs: Tim Cook (Apple), Jensen Huang (Nvidia), C.C. Wei (TSMC) , Arvind Krishna (IBM), and the Stargate Project led by Softbank (Masayoshi Son) and OpenAI (Sam Altman). Second is his “One Big Beautiful Bill,” which ensures continuation of the 21 percent corporate tax rate and adds new incentives (bonus depreciation, R&D expensing, and interest deductions). But the bill also enables retaliation against discriminatory foreign taxes (proposed Section 899 to the Internal Revenue Code), and that prospect could seriously deter inward FDI. Third is the promise, contained in the February 2025 White House fact sheet, to “fast track” investment from specified allies and partners, and to expedite environmental reviews. Fourth and finally, approval of the Nippon Steel “partnership” with US Steel (reversing Trump’s earlier opposition) augurs a less hostile attitude towards foreign acquisitions.
But negative to FDI inflows are Trump’s attacks on accepted norms, namely visas for graduate students and temporary workers, the World Trade Organization and free trade agreements, and the independence of the Federal Reserve. As well, tariffs are also negative for many multinational corporations (MNCs), given the complementarity between FDI and trade for the MNCs that conduct the vast majority of all US trade. Finally, as mentioned, proposed Internal Revenue Code Section 899, which enables tax retaliation when foreign governments are labeled “unfair,” could dampen the willingness of foreign MNCs to invest in the US.
Factors determining FDI flows
An abundant econometric literature explores factors that determine inward FDI flows. Many studies reach similar conclusions as to the main factors. But research has not tried to investigate the personal touch, exemplified by Trump’s demands on major corporations, nor has it investigated the sort of institutional attacks mounted by Trump.
Market size, represented by a GDP measure, is widely considered the foremost positive factor driving FDI inflows. The argument is that a larger market offers more opportunities and is less susceptible to adverse risks. US market size is a big plus for FDI inflows but is not a factor changed by Trump’s policies.
Trade openness, measured by total trade to GDP, encourages FDI inflows. Investing companies prefer low barriers both for obtaining inputs from world sources and for gaining preferential access to foreign markets that are linked by free trade agreements. Trump's tariff agenda, aimed at closing the trade deficit and ensuring “fairness,” has severely disrupted the US market. Since tariffs reduce trade openness, FDI inflows will be discouraged.
High labor costs negatively affect FDI inflows. A Goldman Sachs report, summarized by the Financial Times, finds that US production costs for nearly all manufacturing sectors substantially exceed costs in the top three competitor countries. High US labor costs deter FDI inflows but are not a factor changed by Trump’s policies.
High corporate tax rates negatively affect FDI inflows both in advanced economies and emerging markets. Trump’s “One Big Beautiful Bill” continues the low (21 percent) US corporate tax rate and adds new incentives. These are positive features for FDI inflows that a Democratic president would not have pursued.
Institutional factors such as economic freedom, property rights, and judicial enforcement of contracts are commonly found to encourage FDI inflows. Trump’s attack on accepted norms may erode the US advantage in the institutional dimension. Enacting Section 899 could do further damage.
Conclusion
The annual level of FDI inflows over the past decade suggests that a figure approaching $600 billion in 2025 is almost impossible. Trump’s personal touch and business-friendly tax and regulatory policies could boost the inflow rate towards $400 billion. But contrary to Trump’s strong views, his tariff agenda carries negative implications for inward FDI.
Note
1. In March 2025, Trump repeated the argument that tariffs would foster ample investment, in the context of criticizing CHIPS Act subsidies. See Tripp Mickle, “Trump’s Pan of CHIPS Stirs Panic,” New York Times, March 11, 2025, p. B1.
Data Disclosure
This publication does not include a replication package.
