Attracting foreign direct investment (FDI) inflows is one of U.S. President Trump’s key governing objectives. Under his push, multiple companies have announced new investment commitments.
Comparing Trump’s policy measures with the determinants of FDI identified in econometric studies, the conclusion is that U.S. FDI inflows in 2025 may exceed those in 2023 and 2024, possibly reaching close to $400 billion, but it will be difficult to achieve the target he has set.
According to data from fDi Intelligence, from January to April 2025, foreign companies committed to a total capital expenditure of about $200 billion. If this pace were maintained for the whole year and all commitments were realized within the year—both extremely unlikely—the annual FDI inflow would reach $600 billion, still far below Trump’s target.
In February 2025, just one month into his term, Trump declared that he would welcome FDI from “partner countries” and remain open to passive investment from all countries, while strictly reviewing FDI from “rival countries” such as China. In March, he formally established the “Investment Accelerator” agency to facilitate projects within the U.S. exceeding $1 billion and to offer better conditions for projects related to the CHIPS and Science Act than the previous administration did.
On May 16, during a visit to the Middle East, Trump high-profiled that since the beginning of his second term, FDI flowing into the U.S. was approaching $12 trillion—an “unprecedented” level that “no country in the world has ever achieved.” He also claimed that every meeting with foreign investors would add another trillion dollars to that number.
Erecting high tariff barriers is Trump’s core strategy for attracting FDI. In October 2024, Trump told Bloomberg that the higher the tariff rates, the more likely companies would be to enter the U.S. and set up factories to avoid tariffs. In theory, Trump’s tariff measures could boost FDI inflows from firms that value the U.S. market. However, the tariffs largely target key industrial raw materials and other intermediate goods, which will significantly weaken or even reverse FDI inflows.
In addition to high tariffs, the Trump administration has implemented four other FDI policies: first, putting pressure on tech giants to get CEOs of Apple, NVIDIA, TSMC, IBM and others to make investment commitments far above expectations; second, launching the “Beautiful Act,” which keeps the corporate tax rate at 21% while adding full deductions for new R&D expenses, accelerated depreciation, and pre-tax deductions for interest expenses, and plans to introduce Section 899, allowing retaliatory measures against unfair foreign tax policies; third, opening a “fast track” for investments from certain allies and partners and simplifying environmental review processes; fourth, reversing an earlier decision to approve Nippon Steel’s acquisition of U.S. Steel, indicating a potentially friendlier attitude towards foreign acquisitions.
However, Trump’s changes to existing norms have had negative impacts on FDI, including restricting graduate and temporary work visas, challenging WTO and free trade agreements, and intervening in the Federal Reserve’s independence. Given the complementarity between FDI and trade—multinational companies dominate most of the U.S.’s trade—high tariffs are also detrimental to them. The retaliatory taxing power granted by Section 899 will further weaken foreign firms’ willingness to invest in the U.S.
A large body of econometric literature has studied the determinants of attracting FDI. The conclusions are largely consistent, though they do not account for the institutional shocks caused by Trump’s pressure and policies.
Market size, measured by GDP, is considered the primary factor in attracting foreign capital. A large market means more opportunities and lower risks. The size of the U.S. market is a major advantage for attracting FDI, and Trump’s policies have not changed this advantage.
The higher a country’s trade openness (total trade as a percentage of GDP), the more favorable it is for foreign investment inflows. Companies tend to choose economies with lower trade barriers to access global raw materials and enter overseas markets through free trade agreements. Trump’s tariff policies, implemented under the banner of reducing the trade deficit and ensuring “fair” trade, have reduced trade openness and inevitably weakened the country’s attractiveness to foreign capital.
High labor costs suppress foreign investment inflows. A Goldman Sachs report shows that production costs in nearly all U.S. manufacturing sectors are significantly higher than those of the three main competing countries, and Trump’s policies have not changed this.
Raising corporate tax rates has a negative effect on FDI inflows. The “Beautiful Act” continues the U.S. corporate tax rate at 21% and adds new incentives, which is favorable for FDI inflows—an approach the Democratic Party typically does not adopt.
High economic freedom and strong property rights protection are widely confirmed to promote foreign investment inflows. Trump’s disruption of established norms may weaken the U.S.’s institutional advantages, and Section 899 may exacerbate this disadvantage.
Looking at the past decade, it is virtually impossible for U.S. FDI to reach $600 billion in 2025, but $400 billion is within reach. Contrary to Trump’s perception, the tariff agenda has a negative impact on FDI.