US foreign direct investment falls 21% in Q1 — lowest since 2022
Writer: Mirella Franzese
August 2025 — Foreign direct investment (FDI) in the United States fell 21% in the first quarter of 2025 compared with the same period last year, according to new data from the Bureau of Economic Analysis (BEA). The drop, to just $52.8 billion in 1Q25, is the lowest quarterly inflow since 2022, and represents a notable shift in foreign investment appetite amid the Trump administration’s ‘America First’ Investment Policy.
FDI dollars had topped $61 billion each quarter since early 2023. Beyond serving as a powerful economic driver, FDI is viewed as a gauge of investor confidence in a country’s market size, workforce, and long-term prospects, CitiBank economists note.
Slowing momentum
The BEA data point to waning momentum as geopolitical tensions, policy uncertainty, and rising costs weigh on foreign investment. The slowdown follows a weak 2024 when U.S. FDI expenditures — foreign purchases, expansions, and new business establishments — totaled just $151 billion, far below the $277.2 billion annual average from 2014 to 2023 and $24.9 billion less than 2023’s total.
These figures stand in contrast to the surge in announced “greenfield” projects, new, long-term investments tracked by fDi Intelligence. While more than 1,049 FDI projects were announced in the first half of 2025 — worth a combined $183 billion and an 8.6% increase compared to the same period last year — actual inflows of foreign capital tell a different story.
Simon Evenett, professor of geopolitics and strategy at IMD Business School, said that “the scale of mismatch between headline FDI pledges and actual capital deployment suggests foreign investors aren’t putting their money where their mouths are.”
Some companies are “repackaging” existing capital expenditures (capex) plans. Analysts at investment bank Jefferies estimate that most of the capital spending announced by biopharma multinationals since Trump took office was previously planned.
With sizable contributions from Johnson & Johnson, Roche, and Sanofi, among others, the biopharma sector committed a total of $240 billion in the U.S. by 2030, although Jefferies research shows that 90% of commitments were already part of existing plans, as cited by fDi Intelligence.
According to Jim Renzas, senior director for North America at BCI Global, the disconnect is attributed to ongoing tariff uncertainty and the country’s see-sawing trade policies. “The Trump administration keeps playing ‘kick the can down the road’ with tariffs, making investment decisions in the U.S. very difficult to make,” Renzas told fDi Intelligence. “If the decision on what tariffs apply to what and to whom gets kicked down the road again, expect FDI flows for the entire year to be well below expectations.”
Although Paul Ashworth, chief North American economist at Capital Economics, believes that 1Q25’s FDI numbers may have been impacted by specific transactions, such as mergers, acquisitions and big projects, rather than just policy volatility.
“It’s probably noise, rather than signaling something more dramatic or serious about FDI coming into the U.S.,” Ashworth told Reuters. “If anything, I’d expect FDI to be going up.”
Ashworth added that he expects a boost from the major U.S. manufacturing investment projects announced by foreign automakers set to begin before the end of the year. Back in March, Hyundai Motor Group announced $21 billion in new U.S. manufacturing investments.
“When the tariffs stabilize, we are optimistic that foreign direct (investment) activity in the United States will resume,” Brian Masterson, Nashville partner‑in‑charge at Frost Brown Todd pointed out in an interview with Invest:.
Semi-alarmed
However, tariff-related challenges are ongoing. Despite the semiconductors industry being the largest recipient of FDI capital since President Trump’s return to office, the new administration announced in August that it will impose 100% tariffs on computer chips, which could disrupt FDI activity in the sector. (Notable exemptions have been awarded for companies building in America.)
In addition to tariffs, President Trump’s “one big beautiful” bill may give pause to foreign investors who are considering expansion into the U.S. According to The Tax Foundation, 80% of the current U.S. FDI stock comes from countries that would be directly affected by some of the retaliatory tax measures proposed under this bill.
At the same time, global investors are exiting long-term U.S. bond funds at the fastest pace since 2020, with nearly $11 billion in net outflows from government and corporate bonds in the second quarter, as cited by Financial Times.
Regional focus
For markets like Tampa and Pittsburgh where FDI dollars are driving economic growth, this dip in investment sentiment could slow down expansion at a time when global capital offers tremendous potential.
“Nearly half of our project pipeline is made up of international companies,” Craig Richard, president & CEO of the Tampa Bay Economic Development Council, told Invest:.
According to Liz Krugliak, Pittsburgh’s office managing partner at global accounting firm RSM, “Pittsburgh benefits from a robust foreign direct investment ecosystem,” with more than 1,800 FDI-backed companies in the region and 8,000 across Pennsylvania.
Top image via Ryan Gandolfo/caa
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