How the US election results could affect foreign investors

A new presidency under Donald Trump could have significant effects on foreign companies opening subsidiaries in the US, based on his previous administration’s policies, campaign promises, and rhetoric.

Key areas of impact might include:

Opportunities

Tax Policy:

Trump has historically supported lowering corporate tax rates, which could benefit foreign companies seeking to establish or expand operations in the US.

The Trump administration previously implemented the Tax Cuts and Jobs Act (TCJA) in 2017, which lowered the federal corporate tax rate to 21%.

If a second term saw further tax reductions (his campaign proposal included a corporate tax rate reduction to 15%) or incentives for businesses, foreign companies might find the US even more attractive for establishing a subsidiary.

Also, Trump could push for additional tax breaks aimed at encouraging investment in US infrastructure, research, or manufacturing sectors, possibly favouring subsidiaries that meet certain criteria.

Trade and Tariffs:

Trump’s “America First” approach could result in more protectionist measures, such as higher tariffs or restrictions on imports, which might make the US market more challenging for foreign companies to access without local production.

Foreign companies looking to set up subsidiaries might be incentivised to produce or sell directly within the US rather than exporting goods or selling to the US from their home country.

Deregulation:

Trump’s administration has historically focused on reducing regulations on businesses.

If this trend continues, foreign companies could face fewer bureaucratic hurdles when setting up subsidiaries or expanding operations.

This might include reduced environmental, labour, and industry-specific regulations.

Challenges

Foreign Investment Review:

The Committee on Foreign Investment in the United States (CFIUS) could face more scrutiny, especially for companies from certain countries seen as potential security threats, like China.

The review process for foreign investments could become stricter under a Trump presidency.

Workforce Challenges:

Trump’s tough stance on immigration could make it more difficult for foreign companies to hire non-US talent, particularly if policies regarding work visas (e.g., H-1B) become stricter.

Foreign companies seeking to staff their US subsidiaries with key employees from abroad might face hurdles.

On the other hand, efforts to ease immigration laws for highly skilled workers in certain sectors might make it easier for foreign companies to bring talent into the country for their U.S. operations (E-2 and L-1 visas).

Political and Social Climate:

The political climate under Trump could affect the overall stability of the US market, which might influence foreign companies’ risk assessments when deciding to set up a subsidiary. This could include trade tensions, economic uncertainty, and political polarisation.

Public Opinion and Corporate Social Responsibility:

Companies from regions where liberal or progressive values dominate may face reputational risks if they are seen as aligning with Trump’s policies. Foreign companies might need to consider how their presence in the US aligns with their brand and values.

In conclusion, while a new Trump presidency could offer tax incentives, deregulation, and a potentially more welcoming environment for certain industries, foreign companies may also face trade uncertainty, workforce challenges, and a more complex regulatory environment for foreign investments. These factors would depend on the specific industry, target market, and business strategy of the foreign company in question.

How ZEDRA can help

While expanding a business in the US can be very rewarding, the experience, in light of the new coming Administration, will be challenging without the right support.

Any international company new to doing business in the US will need expertise and insights to navigate the complex and evolving American regulation system and its unique marketplace.

ZEDRA’s Global Expansion team of experts in the US is on hand to help you every step of the way, allowing your local teams to focus on your core business and succeed in the United States.

For more information or to find out how we can help, contact Alexandra Suhas.