As the 2024 U.S. presidential election approaches, the potential return of Donald Trump to the White House is a subject of growing speculation, especially for economic development agencies worldwide. Trump’s first term brought a wave of changes—through deregulation, tax cuts, and protectionist policies—that deeply affected Foreign Direct Investment (FDI) both into and out of the United States. If he wins a second term, we could see both challenges and opportunities for FDI, forcing agencies to adapt their strategies accordingly.
Trump’s FDI Impact During His 2016-2020 Presidency
During Trump’s first term, the Tax Cuts and Jobs Act of 2017 played a pivotal role in attracting FDI into the U.S. By reducing the corporate tax rate to 21%, Trump made the U.S. a magnet for foreign companies, particularly in industries like manufacturing, financial services, and energy. Deregulation efforts in key sectors like oil, gas, and banking also boosted domestic production, making U.S. firms more competitive on the world stage.
Many multinational corporations reaped short-term benefits from these changes. Manufacturing investments saw a surge, as foreign companies sought to capitalize on America’s lower tax rates and more business-friendly environment. Energy investments also grew, with deregulation making it easier for firms to enter the U.S. market.
However, Trump’s protectionist stance – particularly his aggressive use of tariffs – put a damper on some of this progress. For example, tariffs on $80 billion worth of Chinese goods created significant friction in global supply chains, making some foreign firms hesitant to expand operations in the U.S. At the same time, American companies with significant international footprints faced new hurdles due to retaliatory policies, limiting their ability to invest abroad.
Policy Predictions for a Second Trump Presidency
If Trump returns to the White House in 2025, we can expect more of the same—both in terms of opportunities and obstacles for FDI. Here’s how his policies could shape economic development and foreign investment:
1. Pro-Business Policies: A Double-Edged Sword
A second Trump presidency would likely mean more deregulation and further corporate tax incentives, especially in industries Trump favors, such as energy, infrastructure, and defense. This could once again draw in foreign investment, as the U.S. becomes an even more attractive environment for these sectors.
However, protectionist policies, particularly aimed at reducing dependency on global supply chains, could create hurdles for industries like automotive, technology, and consumer goods. For economic development agencies, this presents a nuanced challenge: fostering growth in sectors aligned with Trump’s priorities while helping businesses navigate potential trade barriers.
2. Outbound FDI: Economic Nationalism on the Rise
Trump’s “America First” agenda is rooted in discouraging U.S. companies from offshoring jobs, which may curb outbound FDI. Sectors like semiconductors, pharmaceuticals, and advanced manufacturing could see a slowdown in U.S. investments abroad, as Trump pushes for increased domestic production.
That said, U.S. firms will still seek international opportunities where they hold competitive advantages, such as in technology, financial services, and entertainment. Economic development agencies need to stay agile, helping businesses identify and enter markets that align with both U.S. regulations and Trump’s broader economic vision.
3. Tariffs and Trade Tensions: A Return to Uncertainty
One of the hallmarks of Trump’s first term was his use of tariffs, particularly against China. Should these policies resurface, we may see heightened trade tensions and more significant barriers for companies reliant on global supply chains. Industries like electronics, automotive, and consumer goods could be especially vulnerable, as tariffs on materials like steel and aluminum drive up costs. Although, in many respects, decision-makers within these industries have already priced in such uncertainties following the first administration and the impact of the pandemic.
For economic development agencies, the key will be helping companies pivot to new markets that are less affected by potential tariffs. This may involve identifying emerging economies early in order to acquire market share first or fostering regional trade partnerships to offset some of the challenges posed by Trump’s policies.
Sector Opportunities and Challenges for FDI under Trump 2.0
While a second Trump presidency could introduce new trade barriers and protectionist policies, there are also several industries that stand to benefit from his pro-business stance. Here are some sectors that are likely to see increased investment and growth:
1. Energy
With a strong focus on energy independence, especially in fossil fuels like oil and natural gas, Trump’s policies could lead to a boom in energy-related FDI. Foreign companies specializing in extraction, energy infrastructure, and related technologies may find significant opportunities in the U.S. market.
2. Defense and Aerospace
Given Trump’s emphasis on strengthening national security, defense, and aerospace companies are poised to thrive. Foreign firms with specialized capabilities in these sectors may find the U.S. an increasingly attractive market.
3. Manufacturing
Trump’s policies favoring domestic production could lead to a resurgence in manufacturing FDI. Foreign companies looking to expand their U.S. footprint may find opportunities in sectors like steel, heavy machinery, and automotive parts—particularly if they align with Trump’s goals of reducing dependency on foreign imports.
However, not all sectors will fare equally well. Sectors with deeply integrated into global supply chains—such as automotive manufacturing, electronics, and consumer goods—could struggle under protectionist policies and new tariffs. Economic development agencies will need to help businesses in these sectors navigate trade challenges and explore alternative markets.
Navigating Uncertainty: The role of Economic Developers
For economic development agencies, the potential return of Trump to the White House represents a mix of both risks and opportunities. On one hand, industries aligned with Trump’s nationalist, pro-business agenda could thrive, while those reliant on global supply chains may face headwinds. To succeed, agencies must be proactive, helping businesses adapt to evolving tax policies, trade relations, and regulatory shifts.
For foreign investors, the key takeaway is clear: Trump’s policies, though protectionist in nature, are likely to open up new opportunities in industries strategically important to U.S. economic security. Companies looking to invest in the U.S. should carefully align their strategies with Trump’s priorities, particularly in sectors like energy, defense, and manufacturing.
While the road ahead may be filled with uncertainty, there are significant openings for those prepared to adapt. Understanding the complexities of a Trump-led economic landscape—and being ready to pivot when necessary—will be crucial for anyone looking to capitalize on FDI opportunities in the coming years.
