Observer Predicts Trump Will Take Trade, Investment Restrictions to 'Entirely New Level'
Companies should expect Trump administration to take an increasingly aggressive stance on China-related inbound and outbound investment restrictions, especially because of the makeup of President Donald Trump’s team and key Cabinet officials, a former Treasury Department official and trade consultant said.
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“I think we're going to see far more controls, tightened controls, on inbound and outbound investment,” said Michael Beck, a nonresident fellow with the Stimson Center’s trade, technology and security program. “Trump 2.0 is going to be economic statecraft on steroids.”
Beck, speaking during a virtual conference last week hosted by the Massachusetts Export Center, said China will be “front and center” of the Trump administration’s work on investment restrictions. The Biden administration also was heavily focused on China -- and crafted new outbound investment regulations specifically to block certain deals in China’s artificial intelligence, semiconductor and quantum industries -- but Beck expects Trump to go further.
He noted that Trump’s trade policy memo, issued his first day in office, calls for a review of U.S. export controls and outbound investment restrictions, including recommendations to possibly capture additional Chinese technology sectors (see 2501210023 and 2411150037). “The Biden administration strengthened some of those controls,” Beck said, “and now I think Trump's going to take it to an entirely new level.”
Clay Lowery, who previously served as chair of the Committee on Foreign Investment in the U.S., said it’s unclear how exactly Trump will look to expand the outbound investment restrictions. He said he could see the administration trying to capture passive investments, such as publicly traded securities -- which are specifically carved out of the current restrictions -- because they could have support from Secretary of State Marco Rubio and others who want to be tougher on China.
“Now there will be pushback,” said Lowery, who is the executive vice president of research and policy at the Institute of International Finance. “I could see somebody who actually knows how capital markets work really pushing back against that.”
Even if Trump doesn’t actually expand the scope of investments that would be captured, Lowery said, there are ways the administration could more aggressively enforce the existing prohibitions rather than relying on companies to make decisions on their own about whether their deal is blocked. He also thinks Trump could increase CFIUS enforcement.
“If it is a Chinese direct investment, it is going to be scrutinized,” Lowery said. “I don't care if it is an area of table manufacturing or it’s an area of artificial Intelligence, it's going to be scrutinized very closely.”
Beck, who is the founder of advisory firm TradeSecure, said the administration also likely will focus on Chinese investments involving sensitive personal data on electric vehicles. He said he thinks Trump will continue efforts begun under President Joe Biden to lean on allies that haven’t yet put in place sufficient inbound and outbound investment restrictions. “That's going to continue under the Trump administration,” Beck said. “It’s clear to me that will be a priority.”
Lowery also said much will depend on Trump’s strategy toward Beijing, which he believes isn’t fully fleshed out yet. Trump and his advisers may want to “slap China every now and then,” including through tariffs, export controls or investment restrictions, but Lowery said Trump also knows “I can't do that every single day, and with such quantity, that President Xi [Xinping] never wants to cut a deal with me.”
Lowery said he thinks there are still “disagreements likely within the administration about that strategy. “The people that work for him, they're definitely like, ‘Look, this is the Cold War. This is the Soviet Union. We got to just hit them in the face every single day,’” he said. “That's what he has to figure out. How far do you go on these things if you still want to do stuff?”