Foreign investment in the United States grew at a slower annual pace in the first two years of Trump’s tenure than during Barack Obama’s presidency, according to Commerce Department data released in July. Growth in business investment from all sources, foreign and domestic, accelerated briefly after Trump signed a $1.5 trillion tax-cut package in late 2017 but then slowed. Investment growth turned negative this spring, providing a drag on economic output.
In Trump’s first two years in office, companies announced plans to relocate just under 145,000 factory jobs to the United States, according to data and modeling by the Reshoring Initiative, a nonprofit group. That is a record high in the group’s data, which dates back to the late 1980s, but it adds up to less than one month of average job gains in the United States in its decadelong expansion. More than half of those jobs — about 82,000 — were announced in 2017, before Trump’s tax cuts took effect.
Moreover, the Reshoring Initiative data show fewer than 30,000 jobs that companies say they will relocate to the United States because of Trump’s tariffs on imported steel, aluminum, solar panels, washing machines, and a variety of Chinese goods. Researchers at A.T. Kearney said in July that Trump’s trade policies, including tariffs, had pushed factory activity not to the United States but to low-cost Asian countries other than China, like Vietnam.
Manufacturers of primary metals, which include steel and aluminum, have added fewer than 15,000 jobs since Trump took office, with more than half of those gains coming before Trump imposed tariffs on foreign-made metals last year.
Now manufacturing is struggling amid a global slowdown and fallout from the trade war, which Trump has escalated by imposing additional tariffs on Chinese goods and by labeling China a “currency manipulator.”
A May report by researchers at the International Monetary Fund concluded that the investment impact of the tax bill “has been smaller than would have been predicted based on the effects of previous US tax-cut episodes” and that the strongest effects on investment were likely to have shown up in the first year after the law was enacted. Morgan Stanley’s Business Conditions Index shows companies’ plans for new investment plummeted this summer.
The tax law reduced the corporate income-tax rate to 21 percent from a top rate of 35 percent, and it overhauled the way the United States taxes multinational companies. Data show those changes have encouraged multinational companies to shift hundreds of billions of dollars in profits to their American operations, essentially for accounting purposes, through a process known as repatriation.
Trump often cites repatriation figures as if they reflected direct investment in the United States. That’s wrong, said Brad Setser, a senior fellow at the Council on Foreign Relations who tracks international investment flows.
Commerce Department statistics show that the repatriated funds came mainly from low-tax countries like Ireland and Bermuda, where companies had booked profits to minimize tax liability, and not from China or other economic competitors like Japan.
That flow of money “doesn’t mean all that much,” Setser said. “You’re not in any way seeing a shift in real activity back to the United States.”
Researchers from Wall Street financial firms and the Federal Reserve have concluded that companies used repatriated funds mostly to buy back stock.
Administration officials contend that those selling shares will soon invest their proceeds from the buybacks into startups, business expansions, or other forms of economic activity.
The officials also assert that tariffs are helping to create jobs. Commerce Secretary Wilbur Ross told a conference in Washington in July that the positive effects of Trump’s steel and aluminum tariffs “can be measured on the factory floor.”
Jim Lentz, who oversees North American operations for the Japanese automaker Toyota, has cited the company’s plans to invest $13 billion in American operations over the next several years.
“Thank you, Mr. President, for having such a strong economy for allowing us to be able to do that,” Lentz said at the White House in July.
At a summit in June, Prime Minister Shinzo Abe of Japan handed Trump a chart showing Japanese investments in the United States that would yield just under 22,000 new jobs.
While Trump hailed the figures, Commerce Department data show that the rate of Japanese investment growth in the United States has slowed under Trump, compared with Obama’s second term. And companies like Toyota have warned that the president’s determination that foreign autos pose a national-security threat and may be subjected to tariffs could discourage additional investment.
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