Trump Memo Signals More Investment Restrictions, Less CFIUS Mitigation

The plans, outlined in a memo issued late Feb. 21, orders the Treasury, State, Defense and Commerce departments, along with other agencies, to publish new regulations that strengthen U.S. foreign investment restrictions. Although the memo said the U.S. is “committed to maintaining the strong, open investment environment,” it also said the Trump administration wants to double down on investment rules against Beijing and other “foreign adversaries,” which it defines as China, Hong Kong, Macau, Cuba, Iran, Russia, Venezuela and North Korea.

The order specifically calls on U.S. agencies to consider expanding existing outbound investment restrictions against China. The rules currently cover China’s semiconductor, quantum and artificial intelligence sectors (see 2410280043), but the memo also said other industries should be “considered,” including biotechnology, hypersonics, aerospace, advanced manufacturing, directed energy and “other areas implicated by the [People’s Republic of China’s] national Military-Civil Fusion strategy.”

Those covered sectors “should be reviewed and updated regularly,” the memo said, and may include investment prohibitions involving publicly traded securities, which was carved-out of the outbound investment regulations issued last year by the Biden administration.

Examples of investment sources that could be covered under the outbound regime include “pension funds, university endowments, and other limited-partner investors,” the memo said. “It is past time for American universities to stop supporting foreign adversaries with their investment decisions, much as they should stop granting university access to supporters of terrorism.”

Another portion of the memo threatens the use of “all necessary legal instruments,” including financial sanctions, to “further deter United States persons from investing in the PRC’s military-industrial sector.”

“These may include the imposition of sanctions under the International Emergency Economic Powers Act (IEEPA) through the blocking of assets or through other actions,” the White House said.

The Trump administration is also looking to curb the use of mitigation agreements in foreign investment reviews -- deals that impose certain requirements on parties involved in a transaction as a condition of the Committee on Foreign Investment in the U.S. approving a deal. CFIUS will specifically “cease the use of overly bureaucratic, complex, and open-ended” mitigation deals for U.S. investments in “foreign adversary countries.”

The move is aimed at reducing uncertainty for investors as well as the “administrative burden” that mitigation agreements place on federal agencies, the memo said, while also increasing government efficiency. “In general, mitigation agreements should consist of concrete actions that companies can complete within a specific time, rather than perpetual and expensive compliance obligations,” the memo said. “More administrative resources, in turn, will be directed toward facilitating investments from key partner countries.”

The White House said it wants to create a new “expedited” fast-track process for foreign companies from certain allied countries that make investments in important U.S. technologies. But the fast-track lane will come with conditions -- foreign investors will need to “avoid partnering with United States foreign adversaries,” the memo said.

Another section of the memo said the administration will work with Congress to strengthen CFIUS authority over “greenfield” investments -- when a foreign party starts a new business in the U.S. from scratch. It also wants to “restrict foreign adversary access to United States talent and operations in sensitive technologies,” specifically mentioning AI, and expand the “remit of ‘emerging and foundational’ technologies addressable by CFIUS.”

It calls on the committee to focus on restricting Chinese companies from investing in “technology, critical infrastructure, healthcare, agriculture, energy, raw materials,” farmland near sensitive government facilities, and more.

Policy analysts applauded portions of the memo.

Emily Kilcrease, a senior fellow with the Center for a New American Security, said the plan addresses “long-standing problems in the CFIUS process,” specifically around mitigation deals.

“No more wasting USG resources on ineffective mitigation agreements with Chinese companies,” she said on LinkedIn. “A piece of paper was never going to stop a determined state actor when it came to national security interests.”

She also said she likes the idea of streamlining FDI from allied countries, adding that “details matter on this, but the concept is right.” Kilcrease also said companies should expect a “large expansion” in U.S. outbound investment restrictions, including in the number of covered Chinese sectors and type of covered investments.

John Kabealo, a lawyer working on national security regulatory reviews, said it’s helpful that the memo clearly lists the “foreign adversaries” that likely will and are already subject to strict foreign investment restrictions. “Say what you want about the guy,” he said about Trump on LinkedIn, “but at least the policy is clear, transparent and an honest reflection of what’s already happening.”

Larry Ward, a CFIUS lawyer with Dorsey & Whitney, noted that new restrictions on greenfield investments could curb a method Chinese companies have been using for years to “establish a presence in the United States while largely avoiding the CFIUS process.” The memo “signals that those days are over,” Ward said in an email.

The House Select Committee on China praised the memo, calling it a “crucial step in safeguarding critical technologies, infrastructure, and economic assets from foreign adversaries” such as China.