New foreign investment in U.S. equities plummeted by 62.5% from the final quarter of 2024 to the first quarter of 2025, according to recently released statistics from the Bureau of Economic Analysis (BEA).
New foreign direct investment (FDI)--consisting of foreign ownership of companies in the United States–fell from $88.5 billion in the last quarter of 2024 to $58.7 billion in the first quarter of 2025, a 33.7% decline.
New foreign investment in U.S. equities purchased via the stock market and investment funds fell from $167.8 billion to $23.2 billion, an alarming 86.2% plunge.
Total foreign investment in U.S. equities fell by $174.5 billion, a 62.5% reduction from the fourth quarter of 2024.
Without attempting to draw too many conclusions from a single quarter’s changes, it is reasonable to question whether the administration’s policies are deterring the growth of new foreign investment in the United States.
According to Commerce Secretary Howard Lutnick, “President Donald Trump is committed to bringing in trillions of dollars in new investment into the United States.”
Unfortunately, Trump’s advisors do not seem to share that goal. Peter Navarro, Trump’s senior counselor for trade and manufacturing, says foreign investment in factories like BMW’s in South Carolina is a “scam” that “doesn’t work for America.” Such factories are responsible for more than half of all vehicles assembled in the United States.
If they remain in place, Trump’s tariff hikes will continue to be a big roadblock to foreign investment. Tariffs on raw materials and imported components drive up the cost of producing goods in the United States, discouraging new international investment here.
More fundamentally, U.S. tariffs and quotas that restrict imports leave our trading partners with fewer dollars to invest in our economy and purchase U.S.-made exports. The more we import, the more dollars our trading partners have available to invest in the United States. The less we import, the less international investment we receive.
As long as the Trump administration clings to its misguided view that trade deficits are a national security threat, it will deter U.S. businesses and Americans from attracting foreign investment.No one in the Trump administration seems to understand that when someone buys a U.S. export, Americans benefit, but if they buy a share of Apple, we also benefit, even though the purchase of Apple stock causes our trade deficit to increase.
The Trump administration’s unprecedented actions regarding Nippon Steel’s purchase of U.S. Steel will also have a chilling effect on foreign investment. Trump refused to allow Nippon Steel to merge with U.S. Steel without subjecting several business decisions to a presidential veto. For example, there can be no changes to the location of the company’s headquarters, no salary cuts before 2030, and no acquisition of a U.S. business that competes with U.S. Steel or its supplier without the written consent of President Trump or his designee. Reports are already circulating that these moves may scare off future investment.
The Trump administration’s trade and investment strategy resembles the failed approach utilized by some developing countries in the 1970s: Erect high trade barriers in an attempt to force people to make things here if they want to sell things here, and subject new foreign investment to micromanagement by government officials. It is wishful thinking to believe those policies will work any better here than they have in other countries.
The massive decline in new foreign investment in U.S. companies during the first quarter of the year provides a good opportunity to rethink the administration’s international economic policies.
While new foreign investment dropped compared to the end of 2024, at least it remains positive.
However, if current investment remains at the same level for the rest of the year, the United States will attract 45% less foreign equity investment than we did in President Joe Biden’s last term.
President Trump can and should do better.