The writer is president and CEO of Global Location Strategies.

The upcoming US presidential election has significant implications for foreign direct investment. The sudden shift on the Democratic ticket from 81-year-old Joe Biden to Gen-X candidate Kamala Harris, the stakes are higher than ever — especially as international firms monitor potential shifts in trade and economic policy.

Tariffs will be a key issue. Ms Harris is expected to maintain the tariffs established by Mr Trump’s administration and upheld by Mr Biden. However other than vowing to combat “unfair trade practices” by China or other competitors that undermine US workers, she has been largely quiet on the subject. Meanwhile, Mr Trump has proposed a 10% tariff on most imports and a 60% tariff on Chinese goods.

According to the Tax Foundation, on paper Mr Trump’s plan could raise up to $2.5tn over 10 years, but it would increase the federal deficit by $1.2tn and cut gross domestic product by 0.2% over the same period. Some global manufacturers might expand in North American capacity to sidestep these tariffs, however history shows it may come at a steep price. A University of Chicago study shows that tariffs on washing machines imposed by the White House in 2018 created an estimated 1800 jobs, but at a cost to consumers equal to $815,000 per job.

The future of the Inflation Reduction Act (IRA) is also at stake. It provides companies investing in green technologies up to $216bn in tax credits and has sparked a flurry of investment activity. While the programme will likely stay in place under a Harris administration, things are less certain with her opponent. Mr Trump has pledged to pare back the act, which could be politically risky given some 60% of the country’s clean energy investments announced since the IRA’s passage are in Republican strongholds, according to business group E2 business. That’s despite no Republican voting for the bill’s passage.

Lastly, both candidates oppose Nippon Steel’s acquisition of US Steel — a move likely influenced by Pennsylvania, where US Steel is headquartered, being a swing state. Mr Trump’s rhetoric is more nationalistic and combative, whereas Ms Harris takes a more conciliatory approach. However, companies are run by people who answer to shareholders and customers, and investment decisions are always somewhat emotional. Mr Trump may push companies into or out of investing in the US, while Ms Harris is more likely to cajole them. Ultimately, the election will shape how international businesses engage with the US, not just through the candidates’ policies, but also their political style.

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This article first appeared in the October/November 2024 print edition of fDi Intelligence