"Trump announces U.S. production resurgence, but potential obstacles loom"
The United States and Europe continue to be major hubs for Foreign Direct Investment (FDI), but recent trends suggest a reshaping of investment flows.
In 2024, Europe attracted around $311 billion in FDI, ranking second globally, while North America (including the U.S.) received approximately $268 billion. Notably, foreign investment in North America grew by 61.1% in 2024, indicating a marked increase despite a modest decline from 2023 levels in some measures.
Historically, the U.S. has been a significant recipient and source of FDI, with sizeable outward investment positions peaking at $6.83 trillion by the end of 2024, heavily concentrated in Europe and industries like manufacturing of electronics. Europe, too, has been a top FDI destination, but it faces complex dynamics with China, where Chinese investments in Europe are growing, sometimes outpacing coordinated EU policy controls, raising concerns about dependency and strategic competition.
U.S. policies have played a role in shaping these investment trends. Post-2017, the Foreign Investment Risk Review Modernization Act (FIRRMA) has led to a degree of friendshoring—shifting FDI towards countries with closer political alignment and geographic proximity, favouring nearby allies and seen more in nearshoring trends, partly in response to geopolitical tensions and supply chain risks.
However, total new foreign direct investment in the U.S. fell in 2024 to $151 billion, down 14.2% from 2023, and below the 2014–2023 average. This decline may reflect increased regulatory scrutiny and geopolitical frictions impacting FDI inflows.
Europe's FDI is growing but faces strategic challenges, particularly concerning expanding Chinese investment presence and technology transfers within Europe, an issue intensified by the U.S.-China rivalry. Roughly half of all inbound foreign direct investment in the U.S. has come from Europe, with other major investors including Canada, Japan, and the rest of Asia.
Meanwhile, Swiss firms accounted for 7% of all industrial foreign direct investment in the U.S., and German firms accounted for 14%. Since 2018, a total of 719 billion Swiss francs (about $900 billion) in foreign equity stakes have flowed out of Switzerland and into other parts of Europe and the United States. Direct investment in Switzerland has fallen by 582 billion francs, taking retained earnings into account, since 2018.
The future of FDI in the U.S. remains uncertain, with Trump's protectionist policies potentially forcing foreign firms to produce solely for the domestic market at higher prices and potentially lower quality. Companies that have to date focused on exporting to the U.S. must now weigh their options in the face of country-specific tariffs, with the potential for increased costs and uncertainty.
As for Masayoshi Son's pledge to invest $100 billion to $200 billion in the United States, it is not yet clear whether any portion of this has begun.
In summary, both the U.S. and Europe remain critical FDI hubs historically and currently, but U.S. policies emphasizing national security and reshoring have reshaped investment flows, reducing some inbound FDI to the U.S. while increasing U.S. investment in politically and geographically strategic locations. Europe's FDI is growing but also faces increasing complexity from Chinese investments amid evolving transatlantic alliances and competition.
"What about the finance sector in this context? The surge in Chinese investments in Europe, particularly in industries like technology, has raised concerns about dependency and strategic competition, impacting the general-news scenario of foreign direct investment (FDI) trends in Europe."
"As for the United States, despite a notable increase in foreign investment in North America, total new foreign direct investment in the U.S. fell in 2024, with Europe contributing around half of all inbound foreign direct investment. This decline may reflect increased regulatory scrutiny and geopolitical frictions affecting FDI inflows, leading to uncertainties about the future of FDI in the U.S."
