Nippon Steel and Sumitomo Metal chairman and CEO Shoji Muneoka (R) and president Hiroshi Tomono look … [+]
A survey of senior executives at international companies indicates that while foreign investors remain bullish the U.S. as an investment destination, there are some warning signs emerging.
The 2024 Inbound Investment Survey, released June 28, polled members of the Global Business Alliance, an advocacy group for international companies doing business in the U.S. The results underscore a complex landscape for international businesses in the U.S. Although there is optimism about employment and investment opportunities, significant concerns about tax policies, regulatory environments, and trade agreements were expressed by respondents.
These major employers remain positive regarding employment over the next six months. Sixty percent of respondents expect their employment levels to remain the same over the next six months, while 29% anticipate an increase. This indicates a stable job market within these firms, despite broader economic and regulatory uncertainties.
The GBA U.S. Business Climate Index, a metric used to gauge the overall sentiment towards the U.S. business environment, dropped to 69 points, reflecting growing pessimism. Thirty-six percent of respondents believe that the U.S. business climate is worsening, with only five percent seeing improvement. This dip in confidence is attributed to several factors, including regulatory changes and geopolitical tensions.
Two major concerns highlighted in the survey are the proposed new corporate tax rate of 28 percent and the politicization of cross-border investment reviews. Companies fear that these changes could adversely affect their operations and future investment decisions. Additionally, regulatory challenges and protectionist policies like the Buy America procurement rules and ongoing tariffs on Chinese imports further contribute to the cautious outlook.
The survey respondents are closely watching the Nippon Steel and U.S. Steel deal, viewing it as a barometer for future investment scenarios. The Biden administration has expressed its opposition to the merger, citing concerns over national security and the protection of American jobs. Despite the administration’s opposition, U.S. Steel shareholders have approved the sale, but the deal still faces regulatory scrutiny and significant political resistance
Many survey respondents believe that the perceived politicization of the deal serves as a warning sign for international investors, potentially discouraging further expansion in the U.S. market. This sentiment is particularly strong among companies from Japan and other allied nations, who fear increased protectionism and its implications on their business strategies.
The survey also revealed a strong consensus on the need for more free trade agreements between the U.S. and other countries. Over half of the respondents say the U.S. should pursue additional FTAs with friendly and allied nations to encourage future investments. Currently, the U.S. has FTAs with only one of its key trading partners, Canada, out of eight major contributing countries to foreign direct investment. These countries — Japan, Canada, the United Kingdom, Germany, France, Ireland, Switzerland and the Netherlands — account for 75% of the $5.25 trillion in cumulative FDI in the U.S., according to GBA.
“The Biden-Harris administration has stated that trade is vital to preserving America’s prosperity and competitiveness,” says Nancy McLernon, GBA president and CEO. “The U.S. must begin to secure more free trade agreements with our like-minded global partners. This survey shows that international companies believe that strengthening those connections will encourage further international investment into the U.S. and demonstrate to the world that America is open for business.”
