The U.S. Bureau of Economic Analysis (BEA) reported that foreign investment in the U.S. dropped 45.4% in 2020 compared to 2019, with COVID-19 playing a role.
Foreign investment in the United States reached $120.7 billion in 2020, primarily through acquisitions of existing businesses, according to a recent preliminary report from BEA, an agency of the Department of Commerce. This represents a significant decrease from the revised $221.2 billion reported in 2019.
As in previous years, foreign investors in the U.S. overwhelmingly directly invested in the U.S. by acquiring existing businesses, the BEA found. Out of $120.7 billion, the lion's share of that total, or $116.3 billion, was spent for acquisitions. Only $1.9 billion went to establish new businesses in the U.S. and just $2.4 billion was used to expand existing foreign-owned businesses.
Investments in manufacturing accounted for 52.4% or $63.3 billion of total expenditures.
"Within manufacturing, expenditures were largest in chemical manufacturing ($26.9 billion) and computers and electronic products ($14.8. billion)," the BEA said. "There were also notable expenditures in information ($17.4 billion), primarily telecommunications."
The leading foreign countries investing in the U.S. in 2020 were Germany, Canada and Switzerland, the report said. By region, Europe was the leader, contributing two-thirds of new investments in the U.S. in 2020. The largest state recipients of direct foreign investments were Texas, California and New Jersey, the BEA said.
Greenfield investment spending, or monies spent to either expand U.S. foreign-owned businesses or start a new U.S. business, totaled $4.4 billion, the BEA said. Total planned expenditures hit $19.5 billion for first-year and future expenditures for such projects started in 2020, the report said.
For employees, foreign investments offered jobs for 197,500 people, although planned total employment in the U.S. by foreign investors was 206,500. By far, retail accounted for the single largest employment sector, with between 50,000 and 100,000 people, the BEA report said. The second highest job-producing sector was manufacturing with 30.900 people, primarily in chemical manufacturing, the report said.
U.S. states that benefited most from jobs created at U.S. businesses owned by foreign entities were Texas (50,000-100,000 jobs), California (21,000) and Arizona (9,300), BEA reported.
The BEA revised its 2019 statistics for foreign direct investment in the U.S. It updated first-year expenditures for U.S. businesses acquired to $215.8 billion from its preliminary estimate of $190.7 billion. It revised first-year expenditures for businesses expanded to $2.6 billion from $1.5 billion, a sharp increase. Finally, first-year expenditures for businesses established were revised upward to $2.7 billion from $2.5 billion.
The international trade deficit of the U.S. increased to $71.2 billion in May 2021, rising from a revised $69.1 billion in April, the BEA and the U.S. Census Bureau recently reported. The higher deficit was driven by increases in imported lumber, fuel oil and crude oil, the report said.
The BEA is a nonpartisan and non-political agency that develops statistics including gross domestic product (GDP) by state and county. The measurements of the economy's growth help the government plan for future investments and budgeting.