U.S. Remains No. 1 for FDI, but Rough Waters Ahead, Experts Warn

The Difference a Year Makes

As with many economic studies, Kearney’s FDI Confidence Index is based on data from the prior year. After weathering significant challenges from the Covid-19 pandemic and subsequent high inflation, the U.S. economy regained momentum in 2023, drove down inflation, and sustained higher growth through 2024. Yet in just one quarter, the Trump administration’s ready-fire-aim approach to tariffs and resultant backpedaling have arrested this momentum. Amid this inertia, the economy is now at a heightened risk of a recession.

For the first time since 2022, the Bureau of Economic Analysis reported an estimated quarterly 0.3% GDP reduction, a sharp decline from the 2.4% increase from Q4 2024.

The unveiling of Trump’s reciprocal tariffs at the start of April sent shockwaves around the globe. Shortly afterward, Goldman Sachs and JP Morgan increased their outlook on the probability of a U.S. recession from 35% to 45% and 40% to 60%, respectively. Goldman Sachs later increased this probability to 65% with a predicted 1.0% GDP loss before downgrading back to a 45% risk of recession and 0.5% GDP loss following the Trump administration’s 90-day pause on many of its announced tariffs.

Erik Peterson, Kearney partner and managing director of its Business Policy Council addressed the merits of its 2025 index while acknowledging the about-face in policy is certain to impact the next assessment of investor confidence. “There are significant issues that we can take away from the [2025] results … [But] no doubt some of those attitudes have changed in the meantime. It’s the same planet, different world.”

Kearney is currently planning a follow-up survey mid-year to account for the rapid change in attitudes.

Much of the downturn is due to companies pausing investments rather than canceling them outright. As long as tariffs continue to oscillate between untenably high rates and more measured responses, investors are likely to maintain a wait-and-see approach for fear of pulling the trigger at a time that could be proven inopportune immediately afterward. Yet this approach also incurs costs that often come in the form of labor force reductions.

America-First Manufacturing Brings Job Cuts Home

One of Trump’s primary goals for levying high tariffs is to force companies to return manufacturing operations to the U.S. While promoting domestic manufacturing is undoubtedly a wise investment in the country’s economic future, the immediate consequences of imposing tariffs are at odds with the timeline for developing domestic industry.

The global supply and production model, and particularly that of North America, is so internationally intertwined that unraveling these along geopolitical borders is not only impractical, but impossible to achieve on the timelines laid out by the current U.S. administration.

On April 3, major auto manufacturer Stellantis announced that it would temporarily lay off 900 U.S. workers as a response to tariff concerns—just weeks after pledging to invest $5 billion in the U.S. The company, which is based in the Netherlands, paused production operations at manufacturing facilities in Canada and Mexico, citing the 25% tariff on foreign automobiles and auto parts as a measure that would sharply increase costs. The temporary closure of the foreign plants, which supply U.S. facilities in Michigan, led directly to the layoffs.

“These are actions that we do not take lightly, but they are necessary given the current market dynamics,” said COO Antonio Filosa.

Steelmaker and iron ore mining company Cleveland-Cliffs also announced the decision to lay off 1,200 workers and idle operations at its Dearborn, MI, plant and mines in Minnesota.

“We believe that once President Trump’s policies take full effect and automotive production is re-shored, we should be able to resume steel production at Dearborn Works,” the company said in a statement.

UPS released a cost-reduction plan that involves cutting 20,000 jobs in 2025, citing “macro-economic uncertainty” as a reason for lower demand for services—even as the Trump administration plans major cuts to the USPS. Yet despite other announced layoffs from major companies, weekly jobless claims remain low, a sign of the labor market’s resiliency to the tariff rollout.

Land of Opportunity

True, alarms are sounding on both sides of the political aisle and yes, stumbles out of the starting gate will pose significant, measurable challenges in both the near- and long-term, but the economy is not in freefall. Despite tremors from tariffs that were significantly steeper and broader than expected, many of the factors that inspire investor confidence in the U.S. remain unaffected. A skilled labor force, huge consumer market, broad options for capital, and aptitude for innovation will not be undone by unpopular policy or an uncertain business climate. As businesses adapt to new realities and the Trump administration adopts overtures to foreign governments and investors that find equilibrium between motivation and reassurance, the U.S. will emerge once again as a stable and attractive hub for investment and innovation.