The figures in fDi’s first state-by-state report on foreign direct investment in the US are clear: the country’s efforts to reshore manufacturing and capital are paying off. It’s great news for the US; less so for the rest of the world. 

Most states across the US, even those that are typically less known outside the country, have seen a mounting wave of direct investment in recent years. Battery plants and electric vehicle plants have popped up around major automotive clusters in the Midwest and southern states. So are semiconductor fabs, which went beyond established clusters in Arizona to set up in places like Ohio, New York, and also Idaho. Renewable energy projects have found fertile ground across the Great Plains running across the country north to south, and along the east coast too, although offshore wind projects always pose many development challenges. Even mining and mineral processing is driving new investment in places like Nevada. 

Most of this investment traces back to the ambitions of the Make America Great Again platform, also known as Maga, first unleashed by Donald Trump and carried forward in its substance, perhaps in a different form, by his successor, Joe Biden. As such, it tells little about the competitiveness of the US economy. Rather, it speaks volumes about the level of assertiveness of the White House’s industrial policies. 

The current wave of reshoring certainly raises the question of whether investors are after solid businesses or are only chasing subsidies, which will determine its outcome in the long run. For the time being, however, everything’s coming up roses. The US’s GDP is growing faster than most advanced economies and employment figures remain strong. 

Outside the US things are more nuanced. In the years of hyper-globalisation, the pivotal role of China at the heart of global value chains was enshrined in the butterfly effect: “When a butterfly flaps its wings in China, it can cause a hurricane on the other side of the world.” It turns out that in this new paradigm, when the US administration passes a slew of protectionist industrial policies, their impact equally reverberates across the globe, prompting other geographies from Europe to Australia to join the subsidy race.

However, there are key distinctions to be made that may well lead to very different outcomes. The dollar’s status grants the White House almost unlimited fiscal flexibility (for the time being, at least); that is not the case anywhere else, and highly indebted European countries are already walking a fine line. Besides, US companies did spread their value chains globally over the past decades, but kept within the country the highest-value-added functions. Think of semiconductors, where fabless US firms of the likes of Nvidia, AMD or Qualcomm design the chips that power most digital applications, only to get them printed abroad by foundries owned by TMSC or Samsung. From this perspective, bringing manufacturing back closer to product development and final customers seems a sensible thing to do provided the financials work for both the producers and the customers. Last but not least, US big techs are driving the artificial intelligence revolution both in terms of software and hardware. 

Put it all together, and reshoring gives the US a chance to achieve greater economic autonomy and competitiveness by leveraging its own existing excellencies in strategic sectors. If that is true to a much lesser extent for the EU and China, it’s hardly true at all for anyone else. Foreign trade and investment remains a key component for the competitiveness and development of most economies. Ultimately, isolationism may well serve the strategic interest of the US, but won’t carry much benefit for anyone else. Hence countries the world over should be wary of heeding its siren call.

Jacopo Dettoni is the editor of fDi.

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This article first appeared in the June/July 2024 print edition of fDi Intelligence