(13 May 2025 – USA) What led the US to capture a larger share of global Foreign Direct Investment (FDI) flows? What does Citi’s latest GPS data reveal about how the dynamics of global trade have been shifting? And what are some of the limiting factors for FDI?
Citi’s latest GPS report “Invest USA”, featuring East & Partners research, leverages key insights to guide companies on how they should be interpreting FDI into the US and what they need to know considering the Trump administration’s America First policies.
The US was the largest recipient country of global FDI inflows in 2023, attracting inbound investment of US$311 billion. Today’s FDI landscape is driven by several factors; the rise of globalisation led to increased interconnectedness of the global trade landscape before giving way to a recent shift to deglobalisation, driven by increased protectionism and posing new implications for FDI. Foreign corporations may seek new ways to retain access to other countries consumers while domestic corporates may elect to re-route supply chains or production to countries closer to home or that they perceive as “more friendly”, i.e. “friendshoring”.
Securing “cost efficiencies” remains a key driver of many FDI projects. For importers and exporters, labour costs can represent their single largest expense. So where it makes sense, corporates may pursue FDI plans that enable them to access cheaper labour pools. While cheaper labour costs are certainly a key component of securing overall cost efficiency, other factors such as energy costs are also worth considering.
“The key word that I’m hearing from both investors and corporates is uncertainty. The tariffs of the administration has rolled out are the largest that we’ve seen in a hundred years. And as a result of that, we don’t really know what their economic effects will be” stated Citi Chief Economist, Nathan Sheets for the Citi Institute Podcast episode “Invest USA – Global Trade in Focus”.
“We haven’t seen tariffs like this in a major global kind of setting before. Over and above that kind of economic uncertainty of what does a tariff look like in this world, there’s still huge policy uncertainty as to what the composition of US tariffs is ultimately going to be” Sheets added.
“Geopolitics has such a big impact on corporate decision-making. I had one of our bankers make the point that one of the biggest counterparties for any company globally is the government. And that geopolitics, not just here in the US, but around the globe, has really had an impact” commented Citi Head of Global Government Affairs, Candi Wolff.
“And so you see corporations having to address, how are governments thinking about the geopolitics? Because it impacts how nationalistic, how protectionist, what kind of policies are generated from that politics and that thinking? There’s also the technological trends that I think are shaping, so simultaneous with the geopolitical, you’ve got the technological trends. And you hear about how AI is shaping how business operate, and how information flows, and how governments are trying to think about that, and either accelerate, restrict, encourage. There’s different trends that governments are thinking about in that space.”
