Transatlantic Trade Monitor: Facts You Need Now | Lower Rates, Higher Stakes: What the US Interest Rate Cut Means for FDI

By Ian Hunter, Director, OCO Global

Cheaper money has changed boardroom calculus. With the Federal Reserve’s interest rate cut, European CFOs deciding where to build the next plant or R&D hub now see the United States as easier to finance and faster to scale. Momentum in foreign direct investment (FDI) was already tilting west; lower rates nudge more plans from deck to delivery, especially in states that pair credible incentives with execution. Think Pennsylvania, Texas, New York, South Carolina, Ohio, and Michigan – places where manufacturing, clean energy, and supply chains can move from approval to commissioning without losing tempo.

2025 context: trade and investment reality

FDI into the United States entered 2025 with real traction from European firms, particularly in capital-intensive activity. Our latest Transatlantic Expansion Barometer tracks a decisive tilt toward manufacturing, transportation equipment, and energy & natural resources and shows how rate-sensitive projects benefit when the cost of capital falls. Early 2025 brought some caution, but not a reversal of the broader Europe-to-US reweighting precisely where a US interest rate cut matters: it trims the cost of capital, improves dollar-denominated competitiveness, and helps move projects from site selection to groundbreaking.

Why cheaper money changes the calculus (especially for Europe)

Lower rates reduce hurdle rates for greenfield plants, gigafactory-adjacent suppliers, and M&A. For European boards juggling energy costs and regulatory complexity at home, the US blend of market scale, capital access, and incentives has already been pulling plans west. As one European executive put it: “Our medium-term goal is for the US to become our primary market… we are firmly committed to expanding our footprint in the United States.” A softer dollar typically sweetens entry costs in euro terms; paired with cheaper debt, it can move “wait-and-see” projects into staged approvals—especially where site control and incentives are already lined up.

States most likely to benefit in 2025–26

• Pennsylvania — Advanced manufacturing & robotics momentum (Pittsburgh–Philadelphia), strong logistics, deep R&D; lower financing costs improve the math on equipment-intensive projects and supplier co-locations.
• Texas — Leading destination for European FDI projects, anchored by manufacturing, energy (including renewables), and logistics; cheaper capital + abundant industrial sites = faster time to value.
• New York — Continues to attract European finance, fintech, and life sciences; lower rates stretch runway for UK/EU scale-ups establishing commercial and R&D footprints.
• South Carolina — Automotive supply-chain depth (ICE, hybrid, EV) and a pro-manufacturing environment position SC to win additional tier-1/2 localization.
• Ohio — Rising European project counts, half industrial/manufacturing; expect more as transportation and equipment suppliers lock in Midwest capacity.
• Michigan — The auto capital remains a natural landing zone for hybrids, batteries, power electronics, and software-defined vehicle stacks; cheaper borrowing helps greenlight testing, prototyping, and regionalized sourcing around Detroit’s engineering base.

Sectors where the rate cut is most catalytic

• Transportation manufacturing & aerospace — Cheaper financing supports tooling, line buildouts, and multi-year supplier commitments.
• Energy & natural resources (including renewables) — Rate-sensitive grid-scale and component manufacturing pencil sooner; hydrogen, storage, and wind supply chains benefit.
• Business & financial services / HQs & shared services — Lower rates plus a potentially easier dollar help with location decisions and platform M&A.

Is the Inflation Reduction Act still a factor in 2025?

Federal-level reviews have created noise, but many legislated tax credits and state-level packages still underpin siting decisions – especially in clean energy and advanced manufacturing. For sponsors already in diligence, the practical question is whether enough of the incentive stack remains to de-risk capex. In most current pipelines, the answer is still yes – particularly when paired with competitive state offers.

From Lower Rates to Real Decisions

Lower rates raise the stakes in practical ways. Over the next 12–18 months, expect measured – not dramatic – growth in European project authorizations across US manufacturing, energy, and critical supply chains, precisely the types of capex most sensitive to financing costs. The earliest movers will be projects already in diligence or with site control, while new starts cluster where capital efficiency meets execution speed: streamlined permitting, ready sites, and a day-one workforce. That’s where Pennsylvania, Texas, New York, South Carolina, Ohio, and Michigan are poised to add new suppliers, incremental lines, and R&D expansions, building durable ecosystems rather than chasing only headline mega-plants. On the European side, persistent energy costs and a competitiveness gap continue to tilt marginal decisions toward the US, even as some boards keep a cautious lens in early-2025.

OCO’s second edition of the Transatlantic Expansion Barometer reveals how mid-sized European firms are adapting to ongoing economic and geopolitical uncertainty. Based on 65 company interviews and proprietary FDI statistics, this report delivers fresh insights on cross border sentiment and real-world decision-making in 2025.  Download the report here.

Compliments of OCO Global – a member of the EACCNY