How Foreign Investment Affects the American Economy

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Foreign investment can open a new American workplace or change who owns an existing business. Money put into U.S. businesses mostly does the second: of the $232.2 billion foreign investors spent in 2025 to acquire, establish or expand them, by a preliminary federal count, $218.4 billion went to acquisitions of existing businesses. Both count as investment, but a business purchase is not proof that a single new job has been created.

Companies with majority foreign ownership had 8.57 million workers in the United States in 2024, or 6.1 percent of all private-industry employment. What a deal means for Americans depends on what the business does here afterward.

Foreign money can mean very different things

The Bureau of Economic Analysis, or BEA, treats ownership or control of at least 10 percent of the voting securities of a business in another country as direct investment; the investor does not have to own the whole business.

Portfolio investment, by contrast, means owning stocks, bonds and other financial assets without obtaining that degree of control, according to the Congressional Research Service, or CRS. Buying government debt is therefore a different thing from taking an ownership stake in an operating company.

Foreign direct investment in the United States stood at $5.86 trillion at the end of 2025, BEA reported. That total, known as the direct investment position, measures direct investors’ equity and net outstanding loans to their affiliates, meaning U.S. businesses at least 10 percent owned by a single foreign investor. It is measured at historical cost, which CRS also calls book value, not at market value. This valuation largely reflects prices at the time of investment rather than today’s prices. It describes an accumulated financial relationship, not the amount spent opening workplaces during that year.

Changes in the position reflect financial transactions as well as changes in valuation, including currency adjustments and capital gains or losses. A rise in this total should not automatically be read as an equally large addition to American productive capacity.

Manufacturing accounted for 42.8 percent of the position, with finance and insurance and wholesale trade also receiving sizable investment. Ranked by the country of the ultimate owner, the entity at the top of the ownership chain, Japan was the largest investor at the end of 2025, followed by Canada and Germany. Investment from the Netherlands and Luxembourg was much lower on that basis than when counted by the country of the foreign parent, the first owner outside the United States in the chain. That indicates much of the investment from those two countries was ultimately owned by investors elsewhere.

The businesses do substantial work in America

Majority-owned U.S. affiliates of foreign multinationals employed 8.57 million workers in 2024, according to BEA. Majority-owned means the combined direct or indirect ownership of all foreign parents exceeds 50 percent. The figures in this section cover that narrower group, not every business meeting the 10 percent direct-investment threshold.

These businesses accounted for 6.1 percent of U.S. private-industry employment that year. Manufacturing and retail trade were the largest employment sectors for these affiliates in 2024. The employment total measures the scale of the businesses, not how many jobs would disappear in a world without foreign ownership.

The affiliates’ current-dollar value added, a measure of their direct contribution to U.S. gross domestic product, reached $1.52 trillion in 2024. That represented 6.7 percent of total U.S. business-sector value added. This measure captures production located here rather than assigning it to the country of the owner.

In 2024, these affiliates spent $328.0 billion on property, plant and equipment. They also performed $95.5 billion in research and development, representing 12.4 percent of total U.S. business research and development in 2024.

Economists Bradley Setzler and Felix Tintelnot estimated an average 7 percent direct wage increase for U.S. workers at foreign multinationals in a National Bureau of Economic Research working paper issued in 2019 and revised in March 2021. The estimated premium was larger for higher-skilled workers and employees of firms from countries with higher income per person. The researchers found evidence that participation in a multinational production network, rather than foreignness itself, generated the wage premium. An average gain is therefore not a promise that every worker, occupation or incoming company will produce the same result.

The same study estimated that an expansion of foreign-multinational employment in a local labor market increased employment and value added at nearby domestic-owned firms, with wage gains for higher earners. That extends the possible benefit beyond the people on the foreign-owned company’s payroll.

A new factory and a takeover are different investments

BEA separates new foreign business investment into acquisitions, establishments and expansions. An establishment creates a new legal entity with at least 10 percent foreign voting ownership; an expansion adds a new facility to an existing U.S. affiliate. An acquisition obtains at least a 10 percent voting interest in a U.S. business, excluding additional purchases in affiliates already meeting that threshold.

Preliminary BEA figures put spending to acquire, establish or expand U.S. businesses at $232.2 billion in 2025.

Most of that spending thus bought interests in existing businesses rather than establishing or expanding them. Calling the whole amount new investment is accurate in this statistical category, but calling it all new factories would change its meaning.

BEA groups establishments and expansions together as greenfield investment. That is the more relevant category when the question concerns new business entities and facilities.

Employment at newly acquired, established or expanded foreign-owned businesses totaled 213,100 in 2025. Because acquired businesses are included, that number cannot be treated as a count of jobs newly created by the year’s investment.

BEA’s new-investment spending total and its count of financial transactions, the flows that change the investment position, can differ and both be correct, because they measure different things. New-investment spending counts a project’s total cost whether the money came from domestic or foreign sources, while financial transactions count only funds from the foreign parent group. Financial transactions also include transactions unrelated to new investment, such as equity sell-offs, reinvested earnings and intercompany lending for ongoing operations.

Profits, trade and local gains need separate attention

Foreign multinationals earned $310.1 billion on their cumulative investment in the United States in 2025. Some of an affiliate’s earnings can stay in the business: BEA counts as reinvested earnings an affiliate’s total earnings less dividends paid to its parent, the part kept in the affiliate rather than sent back. So income earned by an overseas owner is not necessarily money that left the United States.

In trade with their foreign parent companies, affiliates of foreign firms operating in the United States accounted for $189 billion in exports and $521 billion in imports in 2014, CRS figures show. An investment’s effect on the trade balance depends on what the business buys and sells across borders; ownership alone does not determine the answer.

Setzler and Tintelnot’s study also estimated that large local-government subsidy deals allowed foreign multinationals to capture a sizable portion of the local economic gains they generated. A community’s evaluation of a project therefore needs to consider the public support offered alongside the benefits to businesses and workers.

Government screening asks about particular risks

The Treasury-led Committee on Foreign Investment in the United States, or CFIUS, reviews certain foreign-investment transactions for national-security risks. It can review transactions that could produce foreign control of a U.S. business and certain noncontrolling investments. A stake too small to control a company is not automatically outside this screening system.

Its authority over noncontrolling stakes covers certain investments in certain U.S. businesses involved in critical technology, critical infrastructure or sensitive personal data. Separate real-estate rules focus on certain airports, maritime ports, military installations and areas around them.

The parties must file a declaration with the committee for certain transactions in which a foreign government is acquiring a substantial interest in certain U.S. businesses, and for certain transactions involving critical technologies. CFIUS can enter legal agreements requiring companies to reduce security risks and can monitor whether they follow those agreements. The President may prohibit a transaction that CFIUS determines threatens national security and cannot be mitigated.

CFIUS can review transactions within its authority even when the parties did not submit them for review. It can also review completed transactions and, while that review is under way, impose conditions to address security risks. Treasury says security risks are generally easier to address before a transaction closes than afterward. Completing a transaction without filing should not be confused with receiving security clearance.

Screening also depends on what happens after agreements are signed. The Government Accountability Office, or GAO, said in a 2024 report that it was unclear how the committee made enforcement decisions. In May 2026, Treasury reported it was still working to implement GAO’s recommendation for a committee-wide enforcement process. Draft enforcement procedures had been developed, but full implementation required committee consensus to finalize them and put them in place.

Competition review addresses another issue: the Federal Trade Commission seeks to prevent mergers and acquisitions likely to reduce competition and cause higher prices, lower quality or less innovation.

The Commerce Department’s SelectUSA program, by contrast, has coordinated federal efforts to attract and retain foreign direct investment, offering firms market information, counseling and ways to connect investors and partners, according to CRS. Helping attract investment and screening its risks serve different purposes; neither role is a guarantee of the gains a particular project promises.

The useful question is what changes for Americans

The foreign owner’s name is a starting point, not a verdict about the American economy. The stronger test follows the business through the transaction: what it does here, what it adds beyond existing activity, and which risks remain after review.