In the first quarter of 2025, foreign direct investment (FDI) in the US fell to $52.8 billion, a significant decrease from $79.9 billion in Q4 2024. This decline occurred amidst rising uncertainty due to the tariff policies of President Donald Trump.
Decline in Foreign Direct Investment
According to Commerce Department data, foreign direct investment in the US in Q1 2025 was the lowest since Q4 2022. This downturn might be temporary as multiple foreign firms, including Nippon Steel, are launching multibillion-dollar manufacturing projects across the nation.
Impact of Trump's Tariff Policies
The drop in foreign direct investment has contributed to a widening US current account deficit, reaching a record of $450.2 billion. This surge was caused by companies rushing to increase imports ahead of the implementation of new trade tariffs. Economists caution that the ongoing uncertainty surrounding tariffs may deter companies from making investment decisions.
Economic Forecasts and Risks
Paul Ashworth, chief North American economist at Capital Economics, suggested that the first quarter figures might be 'just noise' and do not necessarily indicate more serious problems for foreign investments. However, the growing current account deficit and the federal budget deficit may pose long-term risks to the dollar.
Amid the uncertainty caused by tariffs, foreign investments in the US face the risk of continued decline. However, the implementation of large projects may restore interest from foreign investors.
