Foreign direct investment into the United States has not dried up. In fact, for many global manufacturers and suppliers, the long-term case for a U.S. presence remains strong. The market is here. Customers are here. Supply chains increasingly need a North American footprint.

What has changed is not demand, but confidence.

In 2025, uncertainty around federal economic policy — particularly tariffs — has emerged as the single biggest factor slowing foreign investment decisions, especially among small and mid-sized, family-owned companies considering their first U.S. facility. These firms are not pulling back because the U.S. no longer makes sense. They are pausing because they cannot confidently model what their costs, timelines, and risks will look like one, three, or five years from now.

That distinction matters, because it explains why so many project pipelines appear full, yet so many deals remain stuck in evaluation mode.

The overlooked FDI decision-makers

Much of the public discussion around foreign investment focuses on large multinational corporations with global legal teams, flexible capital structures, and diversified production footprints. But a significant share of real-world FDI activity comes from smaller companies — often privately held, often family-owned — making deeply consequential, once-in-a-generation decisions.

For these firms, investing in the U.S. is not just a strategic move. It is a personal one.

When a family-owned European manufacturer evaluates its first U.S. facility, tariff exposure is not an abstract line item. Machinery, equipment, and specialized production assets often need to be imported. Even a modest percentage change in tariffs can materially alter the economics of the entire project. More importantly, uncertainty around future tariff levels makes it difficult to commit capital with confidence.

These owners are not only deciding where to deploy capital. They are deciding what the future of their company — and often their family — will look like for decades. When viewed through that lens, hesitation is not surprising. It is rational.

Why uncertainty freezes decisions faster than cost

Many U.S. states and communities assume that if incentives are competitive and labor is available, projects will move forward. Increasingly, that assumption is incomplete.

In today’s environment, companies can often absorb higher costs. What they struggle to absorb is volatility they cannot predict. Not knowing whether tariffs will change next quarter, next year, or after the next election introduces risk that cannot be mitigated through traditional financial modeling.

As a result, many companies are choosing to slow down rather than rush in. They are watching. They are planning. They are waiting for clarity.

Importantly, this does not signal a loss of faith in the U.S. as a long-term manufacturing location. In many cases, these firms still believe the U.S. is where they ultimately need to be. They are simply unwilling to commit until they feel confident that the rules of the game will remain stable enough to justify the investment.

Site readiness as a risk-management tool

When uncertainty increases, speed and certainty at the local level become even more valuable. This is where site readiness has emerged as a decisive differentiator.

For companies trying to navigate policy volatility, time matters. If a project must move quickly to stay ahead of cost changes or supply chain disruptions, there is little appetite for sites that require years of additional studies, unclear permitting pathways, or speculative infrastructure plans.

True site readiness goes beyond certification labels. It means a site that has cleared its major investigative hurdles — environmental reviews, wetlands analysis, archaeological assessments — so that there are no unanswered questions about whether development is feasible. It means permitting processes that are not only efficient, but proven, with clear examples of timelines that have been met in practice, not just promised on paper.

Utilities are a critical part of this equation. Not every site will have full capacity immediately available, and that is understandable. What matters is whether a community has a realistic, funded plan to deliver power, water, and other infrastructure within a timeframe that aligns with a company’s schedule. For many investors, a credible plan with committed funding is just as valuable as existing capacity.

Communities that have done this work reduce risk at a time when companies are actively trying to limit it.

The underestimated value of leadership engagement

Another factor that continues to influence foreign investment decisions — particularly for first-time investors — is personal engagement from senior state leadership.

For smaller foreign firms, site visits are often as much about trust as they are about data. When a governor, secretary of commerce, or other senior official takes the time to meet directly with company leadership, it sends a powerful signal. It demonstrates seriousness, accountability, and commitment.

In competitive situations where labor availability, buildings, and incentives are largely comparable, that personal engagement can tip a project. It reassures investors that if challenges arise — and they always do — there will be senior leadership invested in seeing the project succeed.

This is not symbolic. For foreign executives unfamiliar with the U.S. business environment, visible leadership involvement helps reduce perceived risk and reinforces the sense that the community is a true partner, not just a transaction counterparty.

Education remains part of the process

For many foreign companies, establishing a U.S. manufacturing operation is unfamiliar territory. Shipping products into the U.S. is very different from hiring workers, navigating state and local regulations, managing permitting, and operating within a new legal and cultural framework.

Part of the site selection process, particularly for first-time investors, is educational. Companies need guidance to understand how the U.S. system works, what timelines are realistic, and how state and local roles intersect. In periods of heightened uncertainty, that guidance becomes even more important.

Helping companies understand that short-term volatility does not undermine long-term opportunity is often as critical as assembling the right site or incentive package.

The path forward

The United States remains one of the most attractive long-term destinations for foreign investment in the world. Market access, workforce depth, infrastructure, and innovation capacity continue to make a compelling case.

But in the current environment, winning projects requires more than strong fundamentals. It requires reducing uncertainty wherever possible. Communities that invest in true site readiness, demonstrate permitting reliability, engage senior leadership, and help foreign investors navigate complexity will be best positioned to convert interest into action.

The deals are still there. The challenge is not demand. It is confidence — and confidence can be built.