Tariffs Aren’t Producing a Surge of Foreign Investment

On the campaign trail, the Felon promised the MAGA base that he would lower consumer prices on "day one" and rebuild America's manufacturing base (ignoring, of course the work the Biden administration had done on the latter issue).  Indeed, one of the supposed reasons for the Felon's on again, off again tariffs and attacks of foreign trading partners is that the Felon has wrongfully claimed the tariffs will supposedly cause foreign investment in the USA to surge and, in the process, help  restore the nation's diminished manufacturing base.  As a piece in Politico lays out, so far the promised surge in investment is not happening and/or much of the new investment was under way before the Felon took office.  Why?   Largely because of (i) the economic uncertainty created by back and forth changes to tariff levels, (ii) the prospect of continued high interest rates, and (ii) and, I suspect, the unsettling fall out from the Felon's rants on Truth Social (a totally misnamed platform) that underscores the reality that "policy" under the regime depends on the shifting whims of the Felon.   Here are article highlights:

Donald Trump has claimed his surge of new tariffs will produce trillions of dollars of foreign investments in the U.S. economy. But some of the people working to lure those investments to U.S. cities and states say they’re not seeing the investment boom, at least not so far.

To the contrary, economic development officials and lawmakers from several states say that the uncertainty fueled by Trump’s on-again, off-again trade wars is keeping many foreign businesses from pouring money into the U.S. market right now. And it signals the uneven impact the tariffs are having on reshoring American manufacturing — Trump’s stated goal for raising rates to the highest levels in a century.

Buffeted by news of companies raising prices as a result of the president’s dramatic tariff increases, the Trump administration has made economic development pledges a centerpiece of its messaging strategy. As businesses across the country fret over the administration’s global trade war, the White House has responded by releasing a running list of billion-dollar commitments from major companies, a sign, the president and his aides argue, that his economic strategy is working by forcing more companies to build their products in the U.S.

The White House, however, is indiscriminate about what announcements it claims come from “the Trump effect.” Some have been in the works for years before they are announced. Others are in line with what the company would have invested, regardless of the tariffs. Some are inflated, adding previous investments to new pledges.

The reality for economic developers is more complicated. Officials work for years building relationships that can one day, hopefully, translate into hundreds, or even thousands, of well-paying jobs. . . . . “These are large investments that businesses are making and they’re going to do them thoughtfully and they’re going to take time,” said Barbara Coffee, the director of economic initiatives for the City of Tucson, Arizona. “When they’re doing site searches, just to determine the location, it takes years, two and three years.”

While a favorite benchmark for both Democratic and Republican lawmakers alike, economic development pledges are notoriously difficult to pin down. Companies sometimes fail to follow through with the plan, or spread out the investment over a longer period of time depending on economic circumstances. Congress even passed a law in 1995 that encourages businesses to put a disclaimer on news releases about investment decisions, saying that they are subject to change.

The Trump administration has been so eager to show signs of economic growth that it has celebrated companies that are merely “considering” increasing production in the United States. . . . . But those announcements may conceal the economic reality. Even as the administration has touted decisions from auto companies like Honda and Stellantis to move production to the U.S., auto manufacturing jobs are down 20.8 percent from 2024, according to the Bureau of Labor Statistics. Auto manufacturing jobs fell 4.7 percent between March and April, when Trump’s 25 percent tariffs on foreign auto imports went into effect.

Other industries are watching the domestic economic and political climate as well. Despite a $50 billion investment pledge, Roche, a pharmaceutical company, said it was evaluating that pledge after Trump issued an executive order aimed at driving down drug prices. . . . . should the EO go into effect, the business reality is that the pharma industry would need to review its expenses, including investments.”

The sense of economic uncertainty has unsettled lawmakers from both political parties. While Sen. Ron Johnson (R-Wisc.) has thus far been unwilling to sign onto legislation to remove Trump’s power to impose tariffs or implement trade deals unilaterally, Johnson said Wednesday at a POLITICO Live event that he’s concerned about how uncertainty surrounding tariffs is affecting businesses in his state.

“What I’m hearing from Wisconsin businesses, manufacturers, the National Association of Manufacturers, The Business Roundtable, is right now investment is on hold,” said Johnson. “Again. I come from the private sector. You want as much certainty and stability” as possible.

Still, investments are projected to slow in 2025, according to industry analysts. The consulting firm Deloitte projected that investments would slow slightly from 3.7 percent 2024, before picking up significantly once the upheaval produced by the administration’s trade and tax policy fades.

That’s a hopeful sign for local officials like Lilley, who’s eager to bring more jobs to North Carolina’s growing population.

Don't expect certainty to return anytime soon.