Many of President Donald Trump’s tax and regulatory proposals are designed to strengthen our economy and encourage foreigners to invest in the United States, fueling the creation of new jobs and unprecedented economic growth. As Trump put it, “My message to every business in the world is very simple: Come make your product in America.”
Trump wisely rejected the views advanced by Peter Navarro, Senior Counsel for Trade and Manufacturing, and former U.S. Trade Representative Robert Lighthizer.
Navarro says that foreign investment is conquest by purchase. Lighthizer says people who invest in the United States are aggressors. According to Lighthizer, “In the last 20 years, we have transferred some $20 trillion of our wealth (in the form of equity in our companies, debt and real estate) to the governments and citizens of the exploiting countries.”
In contrast to their zero-sum thinking, here’s what really happens:
The figures cited by Lighthizer show that the U.S. net international investment position fell from -$2.2 trillion at the end of 2003 to -$23.6 trillion at the end of the third quarter of 2024. This statistic can be misleading, since the change simply indicates that value of foreign investment in the United States has increased more than the value of U.S. investment abroad. It does not reflect a transfer of wealth. During the same period, U.S. wealth increased by $97.5 trillion to an all-time high.
It shouldn’t surprise anyone that Lighthizer and Navarro were wrong about international investment supposedly representing a transfer of our wealth.
Our strong investment climate is the envy of the world. As long as we are the best and safest place in the world to do business, foreigners will continue to “exploit” Americans by investing here.
And as long as the federal government runs massive budget deficits, “foreign aggressors” will continue to purchase Treasury securities, helping keep interest rates low and saving taxpayers billions of dollars in interest payments.
For example, in 2023, foreigners financed one-third of the government’s $1.8 trillion budget deficit. If not for those purchases of Treasury securities, the federal government would have had to come up with another $611 billion in funding from domestic sources. There is no telling how high interest rates would have soared.
Lighthizer and Navarro expect Americans to believe that if someone in another country invests in the United States, they are taking advantage of us. Lighthizer even wants us to start taxing capital flows into the United States to disincentivize foreign investment.
By their way of thinking, Apple is being exploited every time someone buys a share of the company’s stock. And by their logic, Americans who have home loans are being taken advantage of by their banks.
Foreign purchases of U.S. stocks and bonds, direct investment in U.S. facilities, loans to private citizens and companies, and purchases of federal Treasury securities are all examples of investments in the American economy that fuel U.S. economic growth and help our businesses and workers. Trump was smart to reject Lighthizer and Navarro’s misguided ideas. It’s something he should do more often.