The writer is president and CEO of Global Location Strategies, a global site selection consultancy, and also a member of the Site Selectors Guild. E-mail: didicaldwell@glsconsults.com

Looking at current US-China relations, there’s a noticeable trend towards nationalism on both sides of the Pacific. The US has seen a surge in regulations and policies, at federal and state level, aimed at restricting investment from Chinese companies. Even at the local level, where significant potential investments and job opportunities are at stake, attitudes have shifted from positive to cautious, and sometimes to opposition. In Michigan, Chinese battery manufacturer Gotion filed a lawsuit in March against local government for withdrawing financial support for its $2.4bn project that promised thousands of jobs.

This situation brings to mind concerns raised in the 1980s regarding Japanese investments in the US. Back then, there were dire predictions about Tokyo’s potential dominance as the world’s economic centre, and fears of US job losses to supposedly superior Japanese firms. However, today, Japanese companies employ nearly one million US workers, and annually export goods from the US worth approximately $75bn, more than companies from any other foreign country. Products like Honda Civics made in Indiana or Toyota RAV4s made in Kentucky are now commonplace in US households without raising eyebrows.

Now, China is the focus of apprehension. While it’s important to scrutinise foreign companies’ technology and intentions, outright rejection of Chinese investment should give us pause. Today, supply chains between the US and China are deeply interconnected, unlike the situation with Japan in the late 20th century. Rapid decoupling could cause significant and lasting damage to both economies and hinder the US’s decarbonisation goals.

Chinese companies are increasingly choosing Canada and Mexico for their foreign direct investments, because they qualify under USMCA for tariff-free exports into the US. For the US this results in less job creation, reduced tax revenue and potentially higher prices.

Ultimately, Americans need to consider whether they prefer purchasing Chinese goods manufactured in the US by domestic workers, or whether they want to buy Chinese goods produced in China or other countries.

There is no doubt that political risk perception is playing a significant role in some FDI decisions in the US. Geopolitical tensions and ideological differences can create uncertainty for investors, affecting their ability or willingness to invest in certain markets. Policy-makers and business leaders must carefully balance these considerations in the pursuit of sustainable growth and prosperity.

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This article first appeared in the April/May 2024 print edition of fDi Intelligence.