As Donald Trump’s proposed tax policies take centre stage, experts are weighing the potential impact on foreign direct investment (FDI) flows—and what it could mean for green energy financing. Christopher Granville, Managing Director of Global Political Research at TS Lombard, suggests that Trump’s economic approach, centred on tax cuts, could alter the balance of American investments abroad and domestically, with ripple effects in the green energy sector.
A key component of Trump’s plan is an aggressive corporate tax cut, potentially lowering the tax rate on corporate profits to as low as 15%. This cut is designed to encourage major U.S. firms to repatriate profits held in foreign tax havens, bringing capital back to the U.S. rather than keeping it abroad. “A cornerstone of Trump’s program is the extension of the tax cuts enacted during his first presidential term (in 2017),” Granville explained, pointing to this initiative as a catalyst for redirecting financial flows. If enacted, the policy shift would likely hit tax havens such as Ireland, where U.S. tech giants report substantial overseas revenues. This new framework could alter how and where American companies choose to invest internationally.
Historically, U.S. FDI has maintained a balanced pattern, with inflows into the U.S. closely mirroring outflows. However, Granville posits that Trump’s tax policies could disrupt this equilibrium, tilting the scales toward increased domestic investment. “The FDI balance could shift toward inward vs. outbound FDI,” he noted, adding that this might encourage firms to reinvest within U.S. borders rather than pursuing foreign ventures. While beneficial for domestic growth, such a shift could have implications for sectors dependent on international funding, especially green energy initiatives overseas.
Granville highlights that, by reducing the incentive for outbound FDI, the proposed tax cuts may create challenges for international green energy projects, which often rely on U.S. capital. Fewer incentives for overseas investment could mean a reduction in American support for renewable energy developments abroad. Domestically, the impact on green energy financing may also be complex. Lower corporate tax revenues could constrain federal funding for renewable infrastructure, particularly if Trump continues to prioritise traditional energy sources over renewables.
The long-term effects of these proposed policies remain uncertain. However, Granville’s analysis hints at a redefined financial landscape, where U.S. firms may prioritise domestic reinvestment, potentially at the expense of international green energy projects. The coming years could see a shifting investment focus, aligning with Trump’s pro-growth, America-first agenda while challenging the trajectory of green energy financing both within and beyond U.S. borders.
As policymakers and industry leaders consider the implications, the evolving U.S. tax policy under a possible Trump administration could mark a turning point in how American firms view and engage with the global economy.
