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  August 9th, 2018 | Written by

US is losing FDI

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  • The shift of corporate investment away from the US will decrease US income growth and jeopardize US jobs.
  • FDI trends show a shift of global commerce away from the US.
  • There has also been a shortfall in domestic investment by US companies.

We’ve already reported that Chinese investments in the United States are on the decline.

Now it’s become apparent that President Donald Trump’s trade war with allies and adversaries alike is taking a toll in business investments in the United States globally. According to a recent report from the Peterson Institute for International Economics (PIIE), investment into the US by multinational corporations”has fallen almost to zero.”

According to the report, the “shift of corporate investment away from the United States will decrease long-term US income growth, reduce the number of well-paid jobs available, and accelerate the shift of global commerce away from the United States.” Business decisions about major investments like production facilities, mergers and acquisitions activity, and investment in research facilities and workers will also suffer in what the author calls a “post-American world.”

A comparison of foreign direct investment (FDI) into the US in the first quarter of 2018 shows inflows way down compared to the same quarter of 2017 and 2016. The first quarter of 2016 showed $146.5 billion in FDI; the same quarter in 2017 had $89.7 billion; and this year it was $51.3 billion.

“The falloff is a result of a general decline in the United States’ attractiveness as a place to make long-term business commitments,” the report concluded.

To make matters worse, the fiscal stimulus passed by Congress in the form of tax cuts should have boosted by making the US more favorable to production. In addition, one would have thought Chinese and other foreign investors would want to get in before Congress passes the Foreign Investment Risk Review Modernization Act, which will toughen investment rules. Import tariffs should also have provided incentives to invest stateside. But inbound FDI fell, despite all this.

There has also been a shortfall in domestic investment by US companies, according to the report, indicating that “they are making the same assessment as their foreign counterparts…” “If investment outside the United States by US multinationals increases over the rest of this year…,” the report want on to say, “…that would be revealing.”

Net investment into the United States and flows of FDI both in and out are early indicators of how the global economy is moving toward a post-American era. “The signs suggest,” the report concludes, “that Trump’s hostile approach to globalization is getting the world there faster than many realize.”