President Trump issues “America First Investment Policy” presidential memorandum

The Investment Memo reconfirms the United States’ longstanding commitment to open investment to encourage domestic development of key advanced technologies and takes steps to streamline investments by trusted allies and partners. Among other things, it seeks to establish the “fast tracking” of certain investment and environmental reviews and seeks to minimize the use of “open ended” mitigation agreements.

Consistent with evolving US policy over recent years, the Memo focuses on the risks of “predatory investments” by foreign adversaries, including the People’s Republic of China (China), asserting that China has engaged in “exploiting United States capital to develop and modernize its military, intelligence, and other security apparatuses.” Accordingly, the Memo directs that the Committee on Foreign Investment in the United States (CFIUS) tighten the US foreign investment regime. The specific actions set forth include: expanding CFIUS’ authority over so-called “greenfield” investments, expanding the scope of “emerging and foundational” technologies addressed by CFIUS; and “restrict[ing] PRC-affiliated persons from investing in United States technology, critical infrastructure, healthcare, agriculture, energy, raw materials, or other strategic sectors,” including protection for “United States farmland and real estate near sensitive facilities.” 

The Investment Memo is not self-executing, and the policy changes it sets forth will not immediately enter into force and effect. To this end, the Memo directs relevant federal departments and agencies, including the Department of the Treasury (Treasury) which chairs CFIUS, to make specific changes to US investment policy, covering investments not only involving China but also Hong Kong, Macao, Cuba, Iran, North Korea, Russia, and the “regime of Venezuelan political Nicolas Maduro” (perhaps suggesting that private investments in Venezuela may be treated differently). The Memo contemplates the promulgation of new regulations and, in a few cases, consultations with Congress about required changes in law. Therefore, as a practical matter, foreign investors and US firms considering outbound investment should recognize that it will likely to be several months before the Investment Memo is implemented fully. 

Other than the modifications detailed below, the Investment Memo does not appear to change the fundamental approach to review of foreign investments by CFIUS, which is based on an analysis of the national security risk posed as a consequence of (a) the threat, if any, posed by the foreign investor and its host country, and (b) the vulnerability of the US business being acquired. However, the notion expressed in the memo that “[e]conomic security is national security” (at least in the context of Chinese investment practices) suggests the possibility of a more direct role for economic security considerations in future CFIUS and outbound investment reviews.
 
I. Facilitating Investments by Allies and Partners. 

The Investment Memo emphasizes the importance of foreign investment in the United States from allies and partners and calls for measures to facilitate such investment. At the same time, it notes that, with respect to investments in US businesses involved in sensitive areas (i.e., critical technology, critical infrastructure, and personal data), the Trump Administration plans to ease restrictions in proportion to the foreign investor’s “verifiable distance and independence from the predatory investment and technology-acquisition practices” of China and other foreign adversaries. More specifically:

• Fast-Track – Beyond the Existing 30-Day “Declaration” Process. The Trump Administration intends to create an expedited “fast-track” process, which will be based on objective standards. This expedited process is intended to facilitate greater investment from “specified allied and partner sources in United States businesses involved with United States advanced technology and other important areas.” It will be subject to certain security provisions, including that the foreign investor avoid partnering with US foreign adversaries. There already is a 30-day “declaration” process that is essentially a form of fast track. The crucial question about an additional “fast track” process is whether it would apply to a class of cases that otherwise would go through the longer “notice” process.
• Expedited Environmental Review. The Investment Memo provides that the US government will “expedite” environmental reviews for any investments in the United States over $1 billion.
• Streamline Use of Mitigation Agreements. In recent months, private sector firms have expressed concern over the more robust use of “mitigation” agreements by the Biden Administration (i.e., in cases where the requirements under such agreements are adopted to mitigate national security risks relating to an investment). In an apparent effort to address these concerns and dial back Biden-era initiatives, the Investment Memo states that the Trump Administration will “cease the use of overly bureaucratic, complex, and open-ended ‘mitigation’ agreements for United States investments from adversary countries.” The Memo specifies that mitigation agreements should consist of “concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations.” This suggests that the current CFIUS practice of requiring periodic third-party audits to verify compliance by parties with mitigation agreements may be changed. Whether the Trump Administration plans to modify the numerous existing mitigation agreements or simply change the approach with respect to new agreements remains to be seen.
• Passive Investment Encouraged. The Investment Memo declares that the United States will continue to “welcome and encourage” passive investments by “all foreign persons,” including such investments by investors from adversary countries. In this regard, current CFIUS rules do not apply to certain non-controlling investments by foreign persons whereby the foreign person is not afforded specified governance or management rights or access to non-public technical information relating to the business. Whether additional measures will be taken to facilitate such investments remains to be seen.

II. Inbound and Outbound Investments Involving China and Other Foreign Adversaries.

The Investment Memo also aims to address the national security risks presented by predatory investment by foreign adversaries, which is “often concealed and through partner companies or investment funds in third countries.” The Memo states that foreign adversaries, including China, are targeting US technology and infrastructure, among other US “crown jewels.” In particular, the Memo targets China’s “Military-Civil Fusion” strategy, which is designed to utilize civilian Chinese companies and research institutions in support of its military and intelligence activities. 
Consistent with these policy concerns, the Investment Memo calls for the following additional actions to supplement the existing robust CFIUS review of foreign investments from China and other foreign adversaries and the new outbound restrictions on US investments in China and elsewhere). 

Inbound Investments: 

• Restrictions on Chinese Investments in Certain Sectors. Notably, the Investment Memo states that the United States will use “all necessary legal instruments, including . . . CFIUS . . . to restrict China-affiliated persons from investing in US technology, critical infrastructure, healthcare, agriculture, energy, raw materials or other sectors.” Of course, CFIUS already conducts robust reviews of Chinese investments in these and other business areas. Whether the reference to these investments will presage additional restrictions remains to be seen, but it is possible that other “restrictions” (e.g., such as a presumption of denial) could be applied in these areas (as was suggested by a Trump-aligned think tank during the campaign). The fact that the Investment Memo uses the word “restrictions” as distinct from “prohibition” also suggests that the changes will be tailored in nature.
• Expansion of CFIUS Authority over Greenfield Investments, Access to US Talent and Operations, and “Emerging and Foundational” Technologies. The Investment Memo indicates that the Trump Administration will consult with Congress over broadening its authority over certain types of investments. Under current law and regulations, CFIUS has authority over the acquisition of existing US businesses, not purely “greenfield” foreign investments (e.g., where a foreign party incorporates a new entity, builds a factory, licenses technology, and commences operations). Thus, the Investment Memo signals an effort to expand CFIUS authority into this area. While not directly stated, the reference to restricting foreign adversary access to United States “talent and operations” in sensitive technologies may be an effort to limit ongoing engagement by US universities and non-profit entities with Chinese counterparts in research and development areas. 

Outbound Investments:

• Additional Restrictions on Outbound Investments in China (Beyond the Recent Biden Administration Restrictions). The Trump Administration is also considering new restrictions on US outbound investment in key Chinese sectors such as semiconductors, artificial intelligence, quantum, biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy, and other areas implicated by China’s Military-Civil Fusion strategy. Viewed in context, the Investment Memo states that the Administration will review the sufficiency of, and will consider expansion of, the Biden Administration’s outbound investment rules, which took effect in January 2025. The Biden rules either prohibited or required notification of certain investments by US persons into Chinese companies with certain operations in the semiconductors and microelectronics, artificial intelligence, and quantum computing sectors. The potential expansion of Biden-era outbound investment rules could involve the following:
  • The considered application of the rules to additional sectors mentioned in the Memo, such as biotechnology, hypersonics, aerospace, advanced manufacturing, and directed energy, would expand the restrictions to a wider range of Chinese business sectors.
  • The Trump Administration also has indicated it will consider adopted restrictions on a broader range of investment types, including private equity, venture capital, greenfield investments, corporate expansions, and investments in publicly traded securities, from pension funds, university endowments, and other limited-partner investors. Thus, the longstanding concern of Congress and the first Trump Administration over the activities of US universities in China may result in additional restrictions. Such restrictions on universities could relate to both outbound and inbound investments by Chinese firms in US university research.
• Deter Investments in Chinese Military Sector. The Trump Administration will use “all necessary legal instruments” to deter US persons from investing in the Chinese military industrial sector, including blocking sanctions under the International Emergency Economic Powers Act (IEEPA). This suggests new additional prohibitions might be adopted, as the current outbound investment restrictions do not, by their terms, apply specifically to military companies. 

III. Other Actions Being Considered. 

Finally, the Investment Memo identifies various other actions that the Trump Administration will consider:

• review, suspension, or termination of the 1984 US-China Income Tax Convention;
• determine whether financial auditing standards are being upheld for companies covered by the Holding Foreign Companies Accountable Act;
• review the variable interest entity and subsidiary structures used by foreign-adversary companies to trade on US exchanges, which limit US investor ownership rights and protections, and allegations of fraudulent behavior by these companies; and
• restore the highest fiduciary standards, as required by the Employee Retirement Security Act of 1974 to ensure that foreign adversary companies are ineligible for pension plan contributions.

Accordingly, in addition to the specific changes proposed, the Investment Memo confirms that US investment policies will be under continuing scrutiny in the months ahead. Companies and their counsel will need to monitor developments and change course accordingly as proposed changes in approach are implemented by the Trump Administration.