Trump Tariff Wars May Worsen Foreign Assets and Liabilities Gap for US
Net International Investment Position declined by $2.1 trillion in Q4 2024
The ongoing seismic shifts in U.S. trade policies could worsen the nation’s net international investment position. The latest available data shows the gap between the country’s foreign assets and liabilities declined by $2.1 trillion in Q4 of last year.
Uncertainties of an election quarter may have contributed to the erosion in the last quarter. But the unsettling policy shifts in the transition quarter when Donald Trump has succeeded Joe Biden in the White House could worsen the situation further.
The Net International Investment Position (NIIP), calculated as the difference between the country’s external financial assets and liabilities, indicates if the country is a net borrower or lender to the rest of the world.
According to the latest U.S. Bureau of Economic Analysis report, the Net International Investment Position declined to negative $26.2 trillion from negative $24.1 trillion in the previous quarter.
The foreign assets of U.S. businesses amounted to $35.9 trillion, and liabilities $62.1 trillion by the end of December 2024. The revised investment position at the end of the third quarter was negative 24.15 trillion (revised).
The negative $2.1 trillion change in the net investment position from the third quarter to the next quarter came from net financial transactions of negative $411.2 billion and net other changes in position, such as price and exchange-rate changes, of negative $1.67 trillion.
The FRED Blog of the Federal Reserve Bank of St. Louis says undue increase in the NIIP could erode global businesse s faith in the U.S. economy, slowing foreign investments in the U.S.
