Unlock the Publisher’s Digest without cost
Roula Khalaf, editor of the FT, selects her favourite tales on this weekly publication.
The U.S. share of world cross-border funding tasks has risen to its highest stage on report, underscoring the nation’s financial momentum as stronger than that of Europe or China as Donald Trump begins his second time period within the Oval Office.
The information on introduced greenfield tasks – wherein firms construct or broaden new services and operations abroad – come as political and enterprise leaders collect in Davos to debate how a Trump presidency may reshape the worldwide financial order by way of excessive tariffs and relocalization of manufacturing.
The proportion of latest FDI tasks introduced within the US elevated from 11.6% in 2023 to 14.3% within the 12 months to November 2024, in response to the FT’s evaluation of information compiled by fDI Markets, a owned by the FT which has monitored cross-border investments since 2003.
Economists mentioned the rise was pushed by buoyant client demand and authorities incentives on the planet’s largest economic system.
“The United States is attracting increasingly world funding tasks and this displays robust demand prospects and far stronger productiveness progress than elsewhere,” mentioned Innes McFee, world economist at Oxford Economics.
“We count on US exceptionalism to proceed,” he mentioned, including that whereas Trump’s insurance policies are creating uncertainty, a extra versatile price range would stimulate demand and “add causes to spend money on the United States within the close to time period. Protectionist insurance policies may do the identical.”
Trump will converse on the World Economic Forum in Davos through video hyperlink on Thursday, with delegates within the Swiss resort keen to listen to his financial plans. The president didn’t instantly impose larger import tariffs in govt orders issued on the day of his inauguration.
The United States attracted greater than 2,100 new greenfield FDI tasks within the 12 months ending final November. By distinction, China secured slightly below 400 tasks in the identical interval, near an all-time low and a fraction of the greater than 1,000 investments it acquired annually within the decade to the mid-2010s.
New tasks in Germany slumped to 470 within the 12 months to November 2024, the bottom determine in 18 years in Europe’s largest economic system and a pointy decline from 1,100 greenfield investments a 12 months earlier.
Nathan Sheets, chief economist at US financial institution Citi, mentioned the US surge was partly because of the nation’s significance as a hub for synthetic intelligence innovation, decrease power prices and funding incentives as a part of the Inflation Reduction Act and the Biden administration’s Chips Act.
Meanwhile, China’s share of inward FDI has declined resulting from “geopolitics,” Sheets mentioned, referring to the West’s makes an attempt to “de-risk” China.
Europe’s share fell much more sharply. Energy costs have risen on the continent following Russia’s invasion of Ukraine in early 2022 and “low-cost power is enticing to traders,” Sheets mentioned.
According to fDi, the estimated worth of latest greenfield FDI tasks within the US introduced within the 12 months to November 2024 elevated by greater than $100 billion to $227 billion. The information is predicated on firm undertaking bulletins, press experiences and estimates of overseas direct funding over the lifetime of the undertaking, slightly than annual capital expenditure.
The improve in greenfield funding within the United States is unfold throughout a number of sectors. Record 12-month undertaking totals had been recorded for semiconductors – which benefited from Chips Act assist – and industrial gear, building, electronics, renewable power and aerospace.
Growth within the U.S. economic system is predicted to proceed to outpace different superior nations, in response to IMF information launched final week. The US is now forecast to develop 2.7% in 2025, in comparison with an enlargement of simply 1% within the Eurozone.
The altering geopolitical panorama, with rising commerce tensions between the United States and China, is contributing to current developments in overseas direct funding as multinationals search to hedge provide chain dangers.
“Global commerce is extra fragmented and securing provide chains turns into the watchword,” mentioned Samy Chaar, chief economist at Lombard Odier. “This means a development in the direction of friendshoring for items you do not intend to supply and reshoring for strategic sectors similar to microchips and healthcare.”
Sixty-two % of FDI tasks within the United States final 12 months got here from Western Europe, up from 58% within the 10 years by way of 2019, the final 12 months earlier than the pandemic.
In distinction to the rise in inward FDI, the variety of overseas tasks from the US shrank to 2,600 within the 12 months to November, the bottom in 20 years excluding the peak of the pandemic. According to consultants, the Biden administration’s industrial insurance policies have incentivized US firms to maintain manufacturing within the nation.
While uncertainty over the Trump administration’s commerce and tax insurance policies has loomed over massive firms for the reason that November election, economists do not count on his agenda to discourage short-term tasks.
Trump’s election “doesn’t change funding incentives and the financial image” for traders, mentioned Richard Bolwijn, head of funding analysis on the funding and enterprise division of U.N. commerce physique Unctad. “From this viewpoint, the attractiveness of the United States for world investments will proceed to extend.”
